Personal and Family Budgeting

Personal budgeting is a basic part of life. Regardless of your marital and job status, acquiring money saving skills and a basic concept of debt management is key to prospering financially.
 
Unfortunately, many people often underestimate the importance of budgeting or assume that it's too difficult to learn and practice. The truth is, however, budgeting is essential and can be easily incorporated into your daily life. Here are just a few initial steps that anyone can take for personal budgeting success.
 

Figure Out Your Income

The first step to creating an effective personal budget is to estimate your monthly income. Before you organize how much you spend, you first need to know how much you make, preferably on a monthly basis. While those who get paid every two weeks can simply look at their pay stubs for these estimates, others in the service industry who work primarily for tips will have to do a bit more estimating to figure out their monthly wages.
 
Along with your wages, be sure to include any other sources of income you receive monthly, including interest on investments. Additionally, remember to deduct taxes where taxes apply.

Figure Out Your Expenses

Pinning down your monthly expenses can be more difficult then figuring out your monthly income. Between rent or mortgage payments, food, gas and other expenditures, adding up all of the odds and ends you spend money on can be tedious and time-consuming. However, taking the time to figure out how much you spend on average each month is key to practicing effective budgeting.
 
As you calculate all of your expenditures, be sure to include records of anything you've purchased with cash, even for those things without receipts. At end of each week, take some time to go over your records and include anything that you may have missed.
 
To stay organized, you may want to keep all of your receipts and expenditure tallies in one location (such as a notebook or a computer file). As you enter in new information, be as accurate and detailed as possible so that you will understand your notes whenever referring back to them.
 
Some people find it helpful to use categories for organizing their expenses. One popular organizational technique is to divide expenses into the two general categories of "necessity" and "luxury" (or essential and non-essential expenses). From here, you can further subdivide categories (i.e. groceries, gas, fast food). Creating a detailed outline of your expenses will help give you a clear idea of exactly where your money goes each month.

Decide Where You Can Cut

Once you have created a detailed list of your expenses, you will clearly know where you are frivolously spending money. Similarly, you can take a more critical, informed look at areas where you can cut back on spending. Some of the common ways people can cut back on their spending include by:
  • avoiding or limiting coffeehouse trips
  • cooking and eating at home more
  • going to the movie theater less often
  • riding bikes or walking, rather than driving, when possible.
Being more practical with your money is key to effective budgeting. The more you look at where you spend money, the better you will be at finding ways to cut back your spending. Keep in mind, as well, that you may need to adjust your spending for a few months before you find the best areas in which to cut back spending.
 
For those who discover they're in serious need of debt management, cutting down expenses enough to enable saving each month will be necessary. While it may require some sacrifice on your part, it is the only way to get out of debt and regain your financial stability. Do whatever you need to do and be sure to take everything into account, even unexpected expenses.

Tips for Saving Money

Once you figure out how to cut back your spending to fit your income, use the extra money you have to either get out of debt or to start (or increase) your savings. For those in debt, paying off your debt as soon as possible should be your first priority. Student loans, car loans and credit card bills are all good debts to work on paying off.
 
If, however, you have a good money surplus and no debt, start adding money to your savings account. If you are saving up for a vacation, a car or a new home, treat your savings as another "monthly expense." By diligently putting money into your savings each month, you will be able to afford your desired goal in less time than you think.

Budgeting for Your Family

For families, budgeting will need to go beyond the personal level. In fact, if you have a family, personal budgeting can only be a small piece of a much larger puzzle.
To create a family budget, get your family together, calculate your total income and start tracking the monthly expenses of the entire family. Teach your kids how to budget and get them started early. This will not only help you create an effective family budget, but it will also help teach you children the benefits of budgeting and saving money.
 
Resources
 
MoneyIstructor.com (n.d.) Budgeting and Personal Budget Planning. Retrieved February 9, 2008, from the MoneyInstructor.com Web site.
 
Personal Budgeting (n.d.) Budgeting 101. Retrieved February 9, 2008, from the Personal Budgeting Web site.
 
SeekingSuccess.com (n.d.) Career Article 138: Financial Basics: Budgets for Recent Graduates. Retrieved February 9, 2008, from the SeekingSuccess.com Web site.