Why Is It Important To Create A Personal Budget?

Why is it important to create a personal budget? The first step to financial planning is creating a personal budget. The next is to pay off debt, particularly credit card debt, and then to manage spending.

First of all, I would tell everyone that you need to create a budget. What I mean by this is as you first come out of college, you have to determine what your expenses are before you can decide how to save. For example, there is usually no real discretion in putting your money into savings. Maybe you come out of school and you have tremendous credit card debt. So, you can set that as a priority. You can say, "I don't really have money to save right now because I am paying my debt." You need to focus on one step at a time and focus on what's the worst debt you have. You have the ability to say, do I want to put 12 percent on a credit card or I am going to put my money in a saving account at 2 or 3 percent? It is better for the younger person to focus on that debt first. To do that, you need to come up with a budget. You would be amazed. When people really count and see where your their money goes, there is some money left over, believe it or not, to add more impact to paying off that debt first. So, with budgeting, the first thing you want to do is figure out how much money is coming in, how much money is going out, how much debt you have and what you're spending that you really don't need to spend, and can you pay off your debt first. It is a small step, but it is the the first step in the financial process- paying off that student debt or paying off that credit card debt first.

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