How To Make A Personal Budget

Smiling woman with pen, paper, calculatorHow much did you spend last month on food? How about clothing and entertainment? Did you spend a lot on eating out? If your answer to these questions was, “darned if I know,” you need to start tracking your spending as this is the first step in how to make a personal budget.

Apps make it easy

If you have a smart phone – whether it’s from Apple or android-based – tracking your spending will be a cinch. There are some great apps available that are designed to do just that. If you have the iPhone there is Mint, Xpenser, PocketMoney Lite and others. If you have an android phone, there are a number of expense trackers available, including Mint again (it’s cross-platform), Loot and BudgetDroid.

If you don’t have a smart phone

You say you don’t have a smart phone? No problem. You can track your expenses using nothing more sophisticated than a notepad and a pencil. The important thing is to make sure you write down everything you spend money on. This doesn’t mean just utilities, clothing and groceries. You need to write down everything – right down to that drive-through coffee you have in the morning or the soda you drink at work.

Create categories or let the app do it for you

If you have a smart phone with an app such as Mint, it will divide your spending into categories for you. If not, you’ll have to create them yourself. They will most likely be food, housing, utilities, transportation, clothing, medical/health, entertainment), savings, insurance, personal, charitable gifts and, yes, that old devil debt. Of course, you may create some different categories – depending on your spending and lifestyle. You might also want to have a few subcategories, especially for entertainment and transportation. Under entertainment, you might have movies, concerts, dining out and recreation. Transportation could have sub-categories of auto maintenance, gas, loan payment and the like.

Assigning percentages

Next, you will want to assign percentages to each of your categories based on your current spending. These should be fairly easy to calculate because you now know how much you’ve been spending in each category and you know your total net income.

Step two is to set new percentages for each of those categories where you believe you can reduce your spending. These could be the categories of entertainment, food, transportation, personal, debt and clothing. The percentages you assign to these categories should be goals. In other words, if you write down 5% for clothing and 13% on food, these should be less than you’re currently spending. The one category where you might want to increase the percentage is debt because one of the objects of budgeting is to get rid of it.

Your overall goal

Of course, your overall goal should be to reduce your spending to less than your income so that you’re no longer accruing debt. If possible, you should reduce your spending by a large enough percentage that you will free up money you can use to pay down your debts. For example, if you were able to reduce your monthly spending by $200, that would be $200 you could use to pay down your credit card that has the highest interest rate. Once you pay it off, you could add that money to the $200 and start paying off that credit card with the second highest interest rate – and so forth. This could help you become completely debt-free much faster than you might imagine.

An alternative way to get out of debt

If you’re so deeply in debt you feel that no amount of budgeting will do the trick, let us help. We here at Maple Leaf Debt Helpers can customize a debt settlement plan for you, negotiate settlements with your creditors and get your debts resolved. Call our toll free number today or click on the red button for a free estimate.


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