Why your own personal budget important? You may wonder why I talk about this subject, Put it differently. There’re so many articles discussing about it online. So, what’s the heck about budgeting.
A budget is an essential and useful tool, which offers you many great advantages if you want to build wealth and obtain financial freedom.
The good news is that you won’t have to curtail your spending and start living cheaply if you use a budget. A budget is simply a map of your finances. It gives you a clear picture of your current financial position and enables you to apply good financial control.
The choking truth is that middle to high income earners don’t even bother about budgeting. The reason is simple, their income affords them to buy whatever they want in a given situation. They don’t monitor their spending pattern. It only dawn to them when they become heavily indebted. Which means, when they can’t afford to buy any longer
A Budget is personal
We all know that a budget is a simple way to monitor your income and expenses. However, an important fact that’s often overlooked is that a budget is about you—it’s personal.
Everyone’s budget is going to be unique, as we all have different lifestyles and priorities, which affect our needs and wants as well as our income and expenses. We also all have different goals that are linked to our budgets. For instance, one person may want to save more money for a new house or their retirement.
Another person may want to pay off their debts or simply keep track of their finances. Most importantly want to start a business, online or offline
Creating a budget doesn’t have to be about reducing your spending if that’s not a priority for you. If you need to cut back, then reduce an expense that’s not important to you.
Remember, spending money on something that’s important to you, will keep you happy and help you to maintain your budget. So, make
allowances for your priorities and then cut back in other areas.
You need to create your budget to suit your lifestyle and priorities. You must find the right balance between rewarding and restraining yourself. Your budget is personal, so find out what works for you.
The advantages of setting up your personal budget
Despite the fact that most people don’t like the idea of budgeting. Actually there’re some excellent reasons why you should have one. In short, a budget can help you to:
- Become aware of how much income you have and of where your
money is going every month;
- Maintain control of your money and apply financial planning;
- Build a solid, reliable financial foundation;
- Make smarter financial choices;
- Protect your finances
- Get out of debt;
- Achieve financial success.
How to create your personal budget
Creating a budget is really about listing all your income and
expenses. It enables you to monitor your finances and balances at the end of the month. You ultimately want to allocate all your income and pay all your expenses.
However, it’s important to keep your budget as simple as possible. You don’t want to create a budget that’s too complicated, and difficult to maintain. One approach, when creating a simple budget, is to divide your net income into three categories as follows:
- 50% for your needs (such as rent or mortgage, rates, food, clothes, medical aid, insurance, electricity, transportation, etcetera);
- 30% for your wants (such as beauty treatments, entertainment, travel, gadgets, accessories, etcetera); and
- 20% for savings (this includes money saved for your retirement, in investments, for your children’s education).
- If 20% sounds like too much to save at this stage of your life,
then you could include your debt repayments under this category
Don’t underestimate the power of a budget. Learn more here