How to make a personal budget? 5 essential tips

For the past few years, one of the tools I have used to reinforce the pillar of finances, which is essential to live a fulfilling life, has been the budget. However, we don’t always have clear ideas about how to make a personal budget. But before I explain how to do it, it is important to remember what a budget is. It is a financial estimate in which we capture each of the income and expenses that we will have during a certain period of time, with the purpose of better organizing our expenses. A budget can be weekly, monthly or yearly, and in it you must indicate the balances you have in your accounts and investments, monetary income you receive through salaries, rents or other earnings, and of course the expenses you must make during this time, such as the purchase of food, medicines, etc. Undoubtedly we are talking about a very useful strategy to avoid wasting your money on unnecessary purchases, and create a savings that allows you to meet each of the goals you have set. So, if you do not know how to make a budget, here are 5 tips that will help you better organize your economy, through the planning of a personal budget.

• Create a control of your budget

The first step to organize yourself better financially is to create a control in which you can list each of the income and expenses that you plan to make during a certain time, so you can stay financially secure. In this control you should indicate the exact numbers of each inflow and outflow of money you receive, including a detailed description of each figure, so you can better understand the dynamics of your finances.

• Use a spreadsheet or application

Many people, after starting to organize their finances, tend to quickly give up because they find it tedious to write down every single expense they make. Nowadays technology is a great help when it comes to creating a personal budget, since we can count on a great number of applications that make it easier to create a personal budget, better organizing all our financial information. You can make use of Excel spreadsheets, or even mobile applications that allow you to take your budget with you anywhere.

• Classify each type of expense by category

After you identify each of the expenses you have to make, the ideal is to classify them by categories and according to the importance that each one of them represents. You can start by separating them into categories such as:

• Housing expenses (rent, condo, maintenance, etc.).
• Taxes
• Health expenses (treatments, insurance plans, etc.)
• Bills (water, electricity, telephone, etc.)
• Food
• Transportation
• Education

After all your expenses are categorized, the next step is to list them according to the importance of each one, identifying those that you must necessarily pay and those that can be cut in case of emergency.

• Make projections

In addition to keeping track of your day-to-day expenses, it is important that you establish projections for the coming months, so you can have a broader view of your financial situation. For example, if you make installment purchases, you should include the installments in your fixed expenses for the next few months to understand what percentage of your income has been committed. In addition, you can calculate how long it will take you to reach your short-, medium- and long-term financial goals, according to the amount of money you have been able to save per month.

• Make your budget a commitment

Finally, there is no point in knowing how to make a personal budget if you are not fully committed to it. For the tool to work, you must include financial control in your routine and stay focused on the defined goals. That means always keeping an eye on your account balance, avoiding impulse purchases, reducing unnecessary expenses, avoiding debt and keeping an eye on your investments, all in the name of your financial health. Over time, budgeting will become part of your day-to-day life and you will become increasingly motivated by the results.   Why is it important to know how to budget? Learning how to budget is a basic requirement for organizing your financial life and achieving your goals. With the help of a personal budget it will be much easier to create savings with which, in the future, you will be able to cover important expenses without becoming financially destabilized. Remember that in my podcast I share with you many more tools that can help you work on your financial well-being. Click here to start organizing your financial life better and connect with the financial freedom we all want.