Personal Financial Plan
Budgeting
If you’re thinking about starting a personal financial plan, make sure you know why you’re doing it. Some people start one just because it seems to be the mature thing to do, but these people are wasting their time. The purpose of budgeting is to get to a place where your monthly expenditure is less than your monthly income. A zero-based budget is a special kind of budget where you chart where all the money will be going each month to the very cent before you even use it. This takes a lot of commitment and groundwork, but in the end you will have a much better handle on your cash flow by knowing where every dollar is going. As you make the necessary changes due to the spending errors that will turn up, you’ll enjoy the extra money which will help you make the most out of your monthly income.
Spending Plan and Spending Habits
As with most things which require discipline, it helps to have someone to check up on you to see how you’re managing. Perhaps your spouse, one of your parents or a close friend could periodically sit down with you and the budget to see if you’re sticking with it. When you look at where most of your frivolous spending occurs, you may see that it’s usually when you’re with a certain group of friends who aren’t so careful with their money. If this is the situation, it would be wise to start spending less time with those friends – at least until you can establish better spending habits for yourself. In addition, it will be so useful to set a few short-term and long-term financial goals for yourself. Perhaps a long-term goal would be to save up for a down payment on a new house while a short-term goal could be having a pizza night for the family at the end of the month if everything in your spending plan is followed. You’ll be surprised how little things like that can motivate you.
List the amounts in your budget
To begin, pull out your pay stubs from work, your bank statements and any other bills or slips that will be useful as you list the amounts in your budget. Write down how much money you make, even if from multiple jobs in a month, and include your spouse’s income as well if you’re married. Next write down absolutely everything that you spend in a month from bills to groceries and even luxuries like eating out and movies, etc. Then put all your expenses in categories labeled fixed (same amount every month), semi-fixed (amount varies slightly each month) and variable (amount that change considerably each month). If you’re doing this with your husband or wife, agree straight from the beginning to be calm and considerate of one another. If your opinions differ on whether something should be included, rather write it down, and return to it later if necessary. In addition, it’s wise to put a time restraint on how long each session is allowed to last. Most people will be tired emotionally after just thirty minutes. You don’t need to get the budget sorted and established all in one day.
Income and Expenses Columns
Be sure to not leave anything out of your expenses column. Think about birthdays, holidays, special occasions like anniversaries and even a little for random items or events which may arise. It’s also wise to assign a bit of personal money to both you and your spouse – even if the amount is only about $15 for the month; this will actually put you both at ease and help the budget to feel a little more reasonable. When you’re finished listing all your income and specific expenditures, distribute the specific sums of your income to your fixed and semi-fixed expenditure items. Then follow it up with doing the same with your variable expenditure items, and work out the difference between your income and your expenditure. It may or not be an encouraging result, depending on whether or not the number is positive or negative number; however this is just the beginning of you setting up your spending plan.
Budget Changes
Now it’s time for a challenging step – making the necessary changes until your monthly income and expenditure equals one another exactly. This is the most tempting time for husbands and wives to start quarrelling, so exercise some extra patience and grace towards one another; be willing to meet each other halfway. The majority of people will not be left with a positive balance, but perhaps you are one of the few! If so, then use the money to pay off those credit cards or to start a university fund for your children. On the contrary, if you are left with a negative number, start going through all of your expenditure items to decide which items can be eliminated. Determine which things are needs and which are wants, and take off the least important wants items until your income equals your expenditure. By completing this process and sticking with it, you’ll have the opportunity to use your money with much more wisdom and purpose each month.
