Ceri Austin 
Budgeting is essential when trying to save for a down payment, retirement or a dream vacation – it helps manage spending so you don’t get into debt or overspend.
Personal budgeting involves compiling an accounting of your expenses and income, broken down into fixed and variable costs. Although creating and adhering to such a budget may be challenging at first glance, its long-term rewards could make the effort worth your while.
Create a list of your expenses
Personal budgets can be an excellent way to stay on track with saving for goals you care about, but it’s essential that they remain manageable.
To do this, it’s necessary to create an itemized list of your expenses – this will include both fixed monthly bills like rent/mortgage payments, utility bills, car loans etc. as well as variable expenses like groceries and gasoline purchases.
Use credit card and bank statements, along with apps like Mint, to keep an eye on your spending.
If you’re dedicated to making your budget work, though, tools such as Spend Analysis can go further in helping you understand where all the money goes.
Example: If you enjoy going out to coffee shops every week and spending $4 on lattes, this could quickly add up over time and become quite costly. Therefore, it may be worthwhile reducing this activity in order to save more.
Determine your income
Establishing your monthly earnings is the cornerstone of setting a personal budget, so you can set specific goals and work towards them.
Starting off by listing all your income sources – salaries or hourly wages from salaried positions, freelance earnings, investment income, Social Security checks, child support payments, alimony payments, tips or any sporadic income like bonuses from side jobs – is crucial.
Next, divide your expenses into fixed and variable costs. Fixed expenses could include rent, mortgage, student loan or car loan payments as well as car insurance or credit card debt repayment costs.
Variable expenses, like gym memberships and dining out, vary month to month and should be divided up accordingly in your expenses breakdown. By splitting them up this way, it helps identify where most of your money is being spent so that you can determine if it is too much or not enough in any category; if it turns out you are spending more than what is coming in, this indicates it may be time to reevaluate lifestyle and make adjustments as needed.
Set goals
Budgeting may not be easy, but creating one can help you make better financial decisions and become more aware of where your money goes. Furthermore, creating one could lead to saving more and paying down debt faster.
Once you know your goals for using money, set goals. Your goals may range from large (such as paying off debt or saving for retirement) to smaller tasks like reading a book each month or making your own meals.
Once you’ve identified your financial goals, make them specific and measurable using a system such as SMART (Specific Measurable Achievable Relevant Timely). Doing this can create goals which are actionable.
Writing down goals is another effective way of making them tangible, as this allows you to gain clarity and focus on the task at hand. Furthermore, writing goals down removes them from fantasy territory, making your goal-setting much simpler.
Create a budget
Budgets can be invaluable tools for tracking expenses and helping you meet financial goals, as well as relieving stress and making saving easier in emergencies.
Once you know your income and expenses, it’s time to create your personal budget. Start by estimating fixed expenses such as rent or mortgage payments, cell phone bills and garbage bills that remain the same each month.
Step two is to identify variable expenses – those expenses with variable dollar amounts each month such as groceries, gas money, clothes or entertainment costs.
Once you have established a budget, track your spending every month to see if it remains within it. Doing this will allow you to spot spending leaks and determine if any adjustments need to be made to your plan.
