Phyllis Wangui

A three month approach to making own budget Formal education is not a requirement when it comes to making personal budget. It is something that nearly anybody can do. Most people do not have a savings plan in place. Most of the income earned is spent on current expenses. The debt to savings ratio is actually high. If this applies to you, then you need to change the trend. In creating a personal budget you should have in mind. How much money you earn, how much you plan to spend and how much you will save. Below is a three month approach to creating a personal budget. Month one: Track your expenses List down a list of your monthly expenses.Dont Limit yourself. Start from the most important to the least important. Have an idea of how much money you spend every month. Figure out how much money you have after a month of spending. Month two: Do a stock take of month one spending List down what you actually spent in month one against your income: A simple budget should look like this: Disposable Income after statutory deductions: $ 2,500 Expenses: Food: $400 Fuel: $100 Mortgage: $150 Medical: $300 Other household expenses: $400 Entertainment: $200 Savings: $950 If you have a positive savings figure, it means you are able to manage your expenses well. Any negative savings figure should raise a red flag. In this case you need to start eliminating the least important expenses from your budget. Alternatively you can cut down on amount spent per expense. Month three: Write down your actual budget Now that you have a history of your actual spending based on month one and month two. You can now make a two column month to month projected budget for a whole year against actual budget. It’s important to set aside at least 10% of your income to savings every month. In conclusion it’s important to be honest to yourself while crafting your budget. This will minimize the urge to borrow to meet any deficit in your budget. Expenses might change from month to month, therefore it’s important to keep tract of these changes overtime as will help in your future budget plans. And all the time remember to include emergencies in your budget. Always plan for the unexpected.