Before delving deeper into personal budgeting, let’s begin with a small example. Nowadays, many people work in the IT sector, receiving their regular monthly salaries. However, as the days pass, they find themselves with zero money in their pockets left by the end of the month, often unaware of where their earnings went.
The factor here is that it’s not about how much money you earn but how much you save it. This is where personal finance and budgeting come into play. So, let’s break it down step by step.
What is Personal Finance Budget?
Personal Budgeting is personal planning on reducing unnecessary expenses, It’s proper planning before spending your money. This will help you to keep track of your money, achieve financial goals, be debt free, and give financial stability.
Personal Budgeting follows simple category rule 50/30/20. 50% of your income goes to needs, 30% to wants, and 20% will be your savings.
Personal planning on monthly expenses will significantly save the amount of money when compared to unplanned ones.
The following are some of the steps that you have to follow to achieve it.
1] Calculate Monthly Income
This is the first step one has to do for personal budgeting. Sum up all your source of income into one, including your salary, freelance, youtube, Instagram, blogging, rental income, etc. Consider the after-tax amount to get an accurate count of your funds.
2] Track Expenses
Once you get a count of the monthly amount, the next step is to track the amount and where you usually spend it. The best way to do it is to list out all your spending. You can use many tools, including a spreadsheet, a budgeting app, or writing it down in a book. This will give you a clear visualization of where you spend your money.
3] Categorise Expenses
After knowing about all expenses, the next thing is to categorize them. So by doing this, you can limit spending on a particular category.
4] Set spending limits
Spending limits play a key role in saving a significant amount of your money. After categorizing your expenses, start setting limit on each category. This will help to avoid overspending on your money.
5] Track Budget Regularly
Just creating a budget and setting a limit on it does not end your job. Track the budget regularly is also an important thing one has to do. Tracking the budget regularly will help you know whether you are crossing the limit or not.
If you notice any discrepancies or areas where you are overspending, you should make necessary adjustments to balance it.
6] Allocate Remained Amount
If you are successful in budget tracking and all those things, allocating the remaining amount also plays an important role in budgeting. You need to research rates or interests from different on your savings account, check for fixed deposits, and invest in mutual funds. Make sure that your money is earning for you. It may not be much, but somehow, you saved the money and made it work.
7] Set Financial Goals
To make all these personal budget exercises worthy, you should have to plan for financial goals. Setting up financial goals will help you save more and more rather than spend. After achieving this goal, you will get some satisfaction from personal planning.
8] Use Budgeting Tools and Apps
In the play store, many apps are available for personal budgeting. Apart from that, online web tools are also available. The least tracking tool is your spreadsheet. These tools will maximize your savings.
Best Free Personal Finance App India
The following are some of the best online budget planner apps available in the play store.
- Budget & Bills – PocketGuard
- Spending Tracker
- Money Lover
- Apple Wallet
- Money Dashboard Neon
Tips for Addicting Personal Budgeting
1] Auromate Savings – Set up a direct deposit from your paycheck into your savings account. This is a powerful technique where you can see less money underlying, so you will spend much less.
2] Pay Yourself First – Every month, you must set aside a small portion of money from each paycheck into your savings account. This thing should be made before paying off all kinds of your bills.
3] Avoid Impulse Spending – You need to think about the item for 24 hours before purchasing anything. If you feel it is necessary for you, go ahead and buy it.
4] Reward Yourself – As humans, we always expect rewards for our honesty and hard work, so you need to reward yourself for doing a good job on personal budgeting. The reward may be like having a small dinner outside, taking watches, going to the theatre, buying books, etc.
However, budget planning and sticking to it can be challenging, but it’s worthwhile. Budgeting is crucial to gaining control over your unnecessary expenses and achieving your financial goals. By following all the above-mentioned steps, you can achieve personal budgeting.