How To Create A Personal Budget
It is getting harder and harder for young people today to save money, but with increasing housing costs and living expenses it is important to manage consumption and save money. It is easy to find ways to cut back on consumption wherever possible. Try to make a lunch instead of purchasing one. Brew your own coffee in the mornings instead of stopping by your local bistro. But by far the most practical way to limit personal spending and the best way to set aside savings for the future is to make a budget for yourself.
Creating a budget is very simple if you have not done one before: first, identify how much money you are currently making and compare that to how much you are currently spending. It is most common to do this on a monthly basis, but feel free to pick a time frame that works for you.
Second, set targets on how much you want to spend in order to achieve your savings goals. Your goals could be to save a certain amount of money each month, or perhaps to set aside a certain percentage of your total income. It is okay to have flexible goals that change; for example, if you notice higher spending patterns in a particular month, you can set yourself a goal to reduce spending in the following three months. Whatever your goals may be, use them to create your budget.
The last step in creating a budget is often the most difficult – tracking your own spending to make sure you are spending within your limits and not exceeding your budget. This takes diligent work and requires you to save receipts, which is a good practice nonetheless. There is a wealth of free software available that can assist you in tracking your expenses and purchases. I like to use Google Drive and maintain a simple spreadsheet that I can update on my phone from wherever I am.
It is important to give yourself grace and not drive yourself crazy trying to stick to your budget. There will be times when you exceed your budget, but as long as you do your best you will see results.
So what should you do with these found savings? The most prudent thing to do is invest for the future. One need not be an accountant to make sound decisions with their money, though doing the proper research and homework and talking to the right people is advisable. Talk to people such as financial advisers or forensic accountants who can help inform you on recent emerging trends in the marketplace.
By creating a budget you will find yourself better prepared for the future and the unknown.