The Importance of a Personal Budget
The word ‘budget’ rings like a harbinger of doom in the minds of many people. Instead of bringing up images of good planning and wise spending it is looked upon as a ball and chain latched to your wallet rather than your ankle. In truth a budget is simply a financial plan that stipulates how much money will be spent on certain expenses in a given time period. Successful companies plan their year on a budget, as do governmental bodies. Why shouldn’t you?
Planning a Good Budget
A good budget tries to take all eventualities into account. When planning a personal budget, you should set specific amounts for your utility bills, account and loan payments, rent or mortgage payments, savings, and emergency funds. You don’t have the luxury of deficit spending like the government does, so if you find that the amount you need to pay out exceeds the amount coming in, adjustments must be made. These adjustments may be minor, like skipping the soy mocha latte at Starbucks each morning, or severe, like seeking a second job in order to get out from under credit card bills.
Stick to it…. Always!
The best planned budget in the world doesn’t amount to a mountain of Alan Greenspan’s denture adhesive if you don’t stick to it. Controlling impulse and entertainment spending is a must. If you have the means to include an entertainment category in your budget, by all means do so (everyone needs to enjoy themselves from time to time) but make sure you adhere to those guidelines. Dipping into the savings or putting off the power bill in order to indulge in some luxury is just a bad idea. That nifty new PC isn’t really worth having if your power gets cut off because the bill is late, is it?
Plan Major Purchases
You need to set a dollar amount as a spending cap. Anything that costs more than that amount needs to be considered a major purchase, and must be planned for. If it’s just a little over the cap and can be purchased by skipping on the entertainment budget or a similar category for a month or so, then do that. If it’s a high dollar item that must be purchased with some form of credit, seriously consider the impact the payments will have on your budget before making the purchase.