Creating A Budget Plan That Works For You

Creating a budget may not be the solution to all your financial woes but it is a start to redefining and setting straight your financial path. Basically, a budget is a financial plan; a simple way to record your income and expenses. It is a goal that you set for yourself to obtain and maintain a stable financial health by keeping track of how much comes in and how much goes out. Simply put, a budget is a combination of your income, expense, and goals. If you need financial security in life and want to save yourself from piling on debts, creating a budget is a necessity.

Though, it is fairly easy to build a budget, sticking to it will be a tad bit tougher. Initially, you may have problems abiding by your set budget but know that, your budget shouldn’t necessarily be restrictive. You can accommodate few changes here and there but remember to not go all out. The main aim for creating a budget is to have control over your finances and if that is fulfilled then, tweaking a bit isn’t a problem.

How to Budget Money

There are many ways to create a budget. You can use spreadsheet programs, accounting software or simply a pen and a paper, whichever you are comfortable with. A good budget plan incorporates all sources of income, expenses (all 3 types- fixed, variable and periodical), debt (if any) and savings. The most important thing to remember is to be realistic while creating a budget. Setting unrealistic goals will only fail you in the end. So, don’t cut out, cut back. For instance, instead of going to movies every week, go twice a month. If you are eating out everyday, start cooking few days a week at home. Remember, these small changes will add up to a larger sum.

A Sample Budget Format

Categories
Budgeted (B)
Actual (A)
Difference
Income (I)

Total
Total
Total (B)- Total (A)
Expenses (E):

Fixed

Variable

Periodical

Total
Total
Total (B)- Total (A)

Record all your sources of income in the income row. Similarly, list your forecasted expenses- all 3 types: Fixed expenses (rent, electricity, water bills, loan repayment, pre-paid costs), Variable expenses (shopping, restaurants, utilities), Periodical expenses (tax, insurance). At the end of the month, input your actual income and expenses. If there is a difference between the actual sum and the budgeted sum, you need to find out where you went wrong. Work on those areas and see if you can stick to your budget next time around. Hence, it is important to review your budget time and again; make changes where necessary.