Creating a personal budget in 8 steps

4 Apr

With the federal budget released recently it might be time to look at your own personal budget. But don’t worry, it’s not as scary as it sounds. Think of it as your financial GPS, guiding you into the realm of financial freedom. Here’s how to create one in 8 easy steps.

Step 1: Gather Your Financial Information

Start by collecting all your financial statements. This includes your income sources (salary, side gigs, etc.) and your expenses (rent, utilities, groceries, etc.). Yes, it’s time to face the music!

Step 2: List Your Income

Write down all your income sources. Be sure to include your net income (after tax) so you know exactly what you’re working with.

Step 3: Track Your Expenses

Categorise your expenses into fixed (rent, insurance) and variable (groceries, entertainment). For a month or two, track every single expense. Yes, even that overpriced coffee you bought.

Step 4: Set Your Goals

What are you budgeting for? A vacation? Paying off debt? Saving for a house? Set clear, realistic financial goals that will keep you motivated.

Step 5: Create Your Budget

Now, here’s the fun part. Use a simple formula:

Total Income - Total Expenses = Your Budget

If you’re in the negative, it’s time to cut back on those impulse buys.

Step 6: Choose a Budgeting Method

Pick a budgeting method that suits your style. Here are a few popular ones:

Zero-Based Budgeting: Every dollar has a purpose. At the end of the month, you should have zero dollars left to allocate.
50/30/20 Rule: Allocate 50% to needs, 30% to wants, and 20% to savings/debt repayment.
Envelope System: Withdraw cash for different categories and put them in envelopes. When the cash is gone, you’re done spending in that category.

Step 7: Monitor and Adjust

Your budget is not set in stone. Review it monthly and adjust as necessary. Life happens, and your budget should be flexible enough to adapt.

Step 8: Stay Disciplined

Stick to your budget as best as you can. This is where the magic happens! If you stray, just recalibrate and get back on track.

And there you have it! Creating a personal budget is all about understanding where your money goes and making it work for you. If you need help with specific budgeting tools or apps, just let me know by contacting me via my email paul@congdonfuzi.com.au

carl ireland https://www.makesmith.agency