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Easy Personal Budget Planning Tips

Robie writes to help people acquire financial strength. She got her MBA from the University of Venice, Italy.

What Is a Budget?

A budget is the representation on one page of all your income and all your expenses. It provides the financial picture of how much money comes in and where it goes.

A personal budget serves two main purposes:

  1. A budget is a planning tool for your finances. When used correctly, a personal budget provides guidance to make your income and your expenses coordinate in amounts and timing, in a way that makes sense with your personal and financial goals.
  2. A budget helps you measure your progress. By allowing you to compare what you planned to do with what actually happened, a budget highlights areas that need attention and opportunities for improvement.
Budgeting for families can be simple

Budgeting for families can be simple

Why Is Budgeting Good for You?

Taking time to create a personal budget, you gain a clear idea of your finances and you can come up with a strategy about how to handle your money more efficiently.

With a deeper knowledge of your finances and what you need to do to be financially safe, you’ll find a new sense of balance and control, and your stress level about money can be greatly reduced. Control is the key word here.

Bein aware of how you spend your money puts you in control and gives you choices.

The Budgeting State of Mind

So, the goal is to better control your finances and to eventually eliminate any worries you may have about money.

It takes some effort on your side, and some extra time, but it's totally worth it.

Here are the four things to do to enter the correct state of mind as you start budgeting for the first time.

1. Focus on where you are and where you want to be.

2. Take action, protect, and record daily, monthly, and yearly financial transactions.

3. Get the information organized and keep record, use budgeting worksheets and planning software.

4. Commit the money towards your highest priorities first, then you are free to spend what is left as you wish.

Pay Yourself First and Lower Spending

If you wait until the end of the month to save whatever money is left, it can be hard to limit your spending, and you may be left with nothing to save.

Take care of your financial priorities and pay yourself first, schedule automatic transfers to your savings on payday.

You’ll find that with less money available, it's somehow easier to adjust your spending accordingly.

Saving first, and not "seeing" the extra money as available, can help you lower your spending in an almost unconscious way.

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Goals of Personal Budget Planning

  • Maximizing earning and wealth
  • Practicing efficient spending
  • Finding life satisfaction
  • Reaching financial security
  • Accumulating wealth for retirement and an estate
Make a plan. Write down your goals and calculate how much money you need to save monthly to achieve them.

Make a plan. Write down your goals and calculate how much money you need to save monthly to achieve them.

Personal Budget Planning: What Do You Need?

1. Gather and organize all your financial statements: receipts, bills, checkbooks, credit card statements, bank statements, etc.

2. Document all you sources of income.

3. Create a list of monthly expenses and organize them into three categories: fixed expenses, debts, and variable expenses.

4. Calculate your bottom line and see how much of your income you have left after all monthly expenses are covered.

5. Savings: pay yourself first. Now that you know where your money goes, make sure you set up some automatic savings.

6. Goal setting: set up your financial goals and calculate how much you need to save monthly to achieve them.

7. Adjust expenses to make sure you are working toward your financial priorities.

8. Review: every month compare your budget with your actual expenditures and savings and revise your choices, adjust your plan, and tweak your priorities to make it more feasible.

Stop Credit Card Debt

It makes no sense to pay yourself first and save your money earning 1-2%, while you pay 15-20% on credit card interest.

Make paying off your credit cards a top priority. Never pay only the minimum payment.

Keep Your Credit Card Balances under Control

Stop credit card debt: control your spending and pay off your balance - every month.

Stop credit card debt: control your spending and pay off your balance - every month.

Pay cash for your next car - You Can Do It!

After you pay off your current vehicle, continue making the same monthly payments to yourself. A good way to do this is setting up automatic transfers to a separate account dedicated to a car fund.

Keep doing this until you have enough saved to cover the full cost of your next car.

Goal-Specific Saving Accounts

Open a different savings account for each short-term goal. This will make sure that you know exactly where we stand saving towards your goals, and labeling the money serves as deterrent to spend it for something else. For example, you can have accounts labeled:

a. Emergency fund

b. Car fund

c. Home down payment (or home improvement) fund

What Budget Software Do You Need?

Honestly, it is not very important how you keep track of your expenses. The best way to do it is whatever you are most comfortable with, and fits your style.

If you are not a techy person, you could very well do your budget with pen and paper, and be extremely successful.

However, technology can make things much easier for you, from calculating all the formulas, to updating easily, to giving you advice on what you can change to manage your money better.

There are different levels of sophistication you can go. I'm very proficient with Microsoft Excel, so I've always created my worksheets in Excel. But there is a wide range of budgeting software that you can buy and use on your computer, or others that are available online, and you can even synchronize to be up-to-date on all your devices.

Internet Based Budgeting Tools

Call me old fashion, but I am always skeptical about entering all my personal financial information in some web site, so I always use Excel on my own computer for my personal budgeting.

However, truth to be told, there are very nice budgeting tools available on the web, and many are totally free.

I can't give you a review, since I never used them, but here are four of the most popular:

Do You Have Your Goals Straight?

Setting financial goals is the best way to get motivated to save more

Setting financial goals is the best way to get motivated to save more

The Motivational Power of Financial Goals

Few years ago I really wanted to buy a beach home, maybe a small one, but I wanted it few blocks from the beach in a Delaware city that I love.

I was so motivated that no sacrifice seemed too big if it let me save toward a good down payment on my dream beach house. A period of very frugal living started. No more shopping sprees or restaurant food for us.

Every time I wanted to eat out or order in, my husband would say “Do you want the beach house?” A I would go to the pantry with a smile and manage to fix a decent dinner with a fraction of restaurant prices.

In two years we saved quite a bit of money, it would have been enough for a down payment on a small home or apartment, but we ended up moving to the Midwest, too far from my beach location, and used the money to buy the house we live in now.

Even if my dream did not come true, I have a great memory of that period of frugal choices with a focus.

Yes, we could have afforded to eat out, but not doing so made our savings grow quickly. Sometimes I did not feel like cooking, but visualizing my goal getting closer, gave me that extra push to put together a simple yet delicious dinner – many times it would be pasta or some other single-dish nutritious meal.

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

© 2012 Robie Benve

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