Personal Budget Planning

Personal budget planning: covers how to figure out how much you make, how much you spend, and putting it all together to help you spend less.

Everyone talks about setting up a budget and sticking to it, but how do you really go about figuring out what your budget is, or should be? This step-by-step guide takes you through the setup of a budget you can stick to.

What you'll need:

A notebook


A clear mind

The first thing you need to do is spend a week keeping a journal of everything you spend money on. You would be amazed at how much we spend on take-out for lunch, money for tolls or parking spaces, and that morning cup of coffee before work. Keep a running tally of how much you spend for a week. Then multiply this times twelve and you have your total for roughly three months.

Now, you've figured out how much you spend on little items, but it's time to move on to the necessities of life. Get your last three months of pay stubs and determine your average monthly income by adding the totals, after taxes, together. Then gather three months of bills, add them up and divide by three to calculate your monthly fixed expenses such as rent or mortgage, utilities and phone, car payment, insurance and student loan payments. Add together three months of other monthly expenses, including groceries, clothing, credit card expenses, medical bills and the total from your weekly diary above. Divide by three and add the result to your monthly expense total.

Evaluate your expenses. What can you cut back on. That morning cup of coffee can be skipped if you make your own at home. Do you really need to buy the business magazine at the newstand every week? These small priced expenses add up and burden us. Choose one or two things you can skip from your diary and then add one item to the list every week.

If you've got credit card debt, switch to cards with lower interest rates. Keep switching until your card is paid off. You need to begin paying the card with the highest balance and pay more than the minimum balance each month to make any headway.

You can do the same with your phone bill. Continue switching to get the best deal on your long distance phone rates. Phone companies are constantly calling customers with low rates and will usually work with you to give you great deals. Don't be afraid to ask for lower rates. If the answer is no, use the phone company that will give you the rates you want.

Make more meals at home. Take-out is not only fattening, but it is expensive. Pack your own lunch to take to work. Make meals ahead of time and freeze them if you don't have time to cook a dinner every night. Keep in mind that not every meal needs to be a feast. Have a salad, sandwich, or other small meal for dinners, instead of the five course meal.

Set up a savings plan such as a passbook account, certificate of deposit (CD) or individual retirement account (IRA), and begin making regular deposits. Check with your local bank to see what the best option is for you.

Track your income and expenses monthly to evaluate how the plan is working, then fine-tune to produce the desired results. Keep a running tally of your monthly expenses and stick to the budget you choose.

Realize that things come up in life that are unexpected. If you have to break your budget plan, or reconstruct it, occasionally--it is not the end of the world. Car problems, an unexpected need to buy a gift, or health problems can and often will occur at the moment you think you're ahead. Keep plugging away at debt and stick to your budget as much as possible.

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