Personal Budgeting 101:  The 4 Essential Tips


Preparing a personal budget is something most people hate. As a kid, I was a reckless spender, and my parents like to talk about the importance of a budget.  In some cases, I have asked them to lecture on anything but not on the budget. With the passage time, I have realised how much I needed those lessons back then and how much I need to learn about budgeting now.

Budgeting is crucial unless you want to spend your life worrying about how to pay off debts or stressing about your finances. Have you ever visited the supermarket with a list in your hand and came back with more than you wanted to buy and regretted those moments of weakness? If you are a frequent spontaneous spender, you are likely to be out of cash before the next payday. If you understand the hassle of being without any cash, then it worth investing some time on how to prepare a personal budget.

Budgeting is not as difficult as people claim it to be. There are four simple things that you have to keep in mind to prepare yourself a budget and those are following.

1. Know Your Cash Flows

Budget is a plan of cash flows. Therefore, it is vital to know what are your cash flows as these set the foundation for any budget. You may be someone who has one source of income or multiple or maybe a family member is supporting you with the finances. Whatever the situation is, add all the possible incomes up and allocate the sum to your desired categories of expenses.

This step will help to know your main sources of income and how you spend your money. It also helps you to appreciate your spending habit and learn about the impact on your financial life.

Read similar articlesHow to Prepare Personal Budget or How To Improve Your Savings On A Low Budget

2. Set Up Your Goals

The next step is to clearly state where you want to be. It is essential to set up some goals because a planned journey has more chances to land you at your desired destination. As you define your goals, take note of the followings:

  • Know Your Spending Limit

It is essential to assess how much are you supposed to spend a week which leads to your knowledge of spending throughout the month. Once you know what your cash inflow is, it will be easier to list down your necessities and luxuries separately.

While keeping your necessities as your priority do not forget to treat yourself with some luxuries every once in a while as it helps us to keep our hands off the things we should not buy on a daily basis.

  • Figure Out How Much To Save

When you figured out how much you earn and how much you have to spend to meet the ends, you can easily start to save monthly.

When you start to save, keep a well-maintained emergency saving account, which should be out of your reach so that you do not spend that money on petty emergencies like of pizza cravings (sorry if I have hurt the pizza lovers but let’s call a spade a spade). However, keep the emergency savings in liquid investments such that you may not end up with empty hands when you need cash urgently.

You may not have the financial ability to invest at the start, but you may do it in future as multiple income esteem is becoming more than a necessity. Save for your protection, save for a better future!

3. Stick To The Plan

Whoever thinks that taking some time out of their hectic schedule to prepare a budget is the hard part, then they might not have heard about the part where they have to execute their plan.

If you do not intend to stick to your budget, then you do not need to go through the pain of preparing it, as it is only waste of your time. I am not saying that a little improvising cannot take place, it may be the need of the time, but a lot of it can do more harm than benefit.

Sticking to the plan does not mean that you cannot make amends during the process. Of course, there will be a situation that would need your immediate response, and you have to act according to it but be very careful with what you call emergency and try to keep on track as much as possible.

4. Repeat

Once you have successfully executed your plan, learn to keep a check on it and repeat the process. While you go on with the plan, you will see some changes which will only encourage you to repeat the plan.

In conclusion, it does not matter your level of income or debt; budgeting is a tool that will help you to manage your spending. Assess your cash flows, set goals and prepare a budget that will improve your financial situation.

Author Bio: Sarah Smith has been a personal finance author for the last five years. She is also an independent and very passionate finance and investment advisor. She regularly posts at

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