Economic troubles can make you consider your personal financial situation. You may be worried about how much debt you have or about losing your job. Creating a personal budget can help you avoid a potential personal financial crisis. However, ensure that you create a budget that you can stick to. Here is how to start the process of creating a budget:
Step 1: Set Realistic Financial Goals
Financial goals can help you make smart spending decisions. Determine how you would like your finances to look like in a year. Start with what is important to you. The good thing about realistic goals is that you can accomplish them.
Step 2: Track Your Expenses
Do you know where your income goes? It is important to determine your expenses so that you know what you are spending on. Spend your money as you usually do. However, for a few weeks, write down every expense. Tracking your expenses is easy. In fact, if you try it, you will be amazed by what you spend on.
Step 3: Distinguish Between Needs and Wants
To spend money wisely, ask yourself whether the thing you want to spend your money on is a need or a want. Ask yourself whether you want something or need it. You should also determine whether buying a certain thing will get you closer to your financial goals or not. To know whether something is a need or a want, determine whether or not you can live without it. Setting clear priorities will make it easier for you to make wise decisions.
Step 4: Create a Budget
You should ensure that your expenses don’t exceed your income. Try to balance your budget to accommodate what you should pay for. One of the simplest ways to do so is to use our free and easy-to-use budget calculator spreadsheet and worksheet that is meant for Canadians. When creating your budget consider the regular monthly payment of any loans you have.
Step 5: Implement Your Plan
Match your expenses to when you receive your income. Determine what you will use every cent for before getting your income. Allocate money for necessities (food, housing, transportation, utilities, and so on), unexpected expenses, debt payments, savings, and entertainment. This will help you avoid digging yourself deeper into debt as you will not rely on credit to pay for your living expenses. Find out more about this here.
Step 6: Allocate Money for Seasonal Expenses
Some things such as annual membership, new shoes, school expenses just come up. As such, it is good to allocate money for such expenses. Doing so will help you afford these expenses without relying on credit to pay for them.
Step 7: Look Ahead
Getting on track with a personal budget us can take one or two months. Since you did not have a spending plan before, give yourself time to adjust. If things are not falling into place, ask for help. Remember that help is a phone call away.