Making Personal Budget

This page is a beginners guide to budgeting learning how to start a budget plan. The procedure may sound intimidating and adhering to controlling your spending may seem very strict. It is actually quite simple and easy to follow.

First you start by getting some paper together, and you want to make a chart with three columns. Each column will be for writing down your expenses. In the First column, write down Fixed, or necessities,  in the second column write Variable, or necessity with wiggle room, and in the last column write discretionary, or miscellaneous. Something like what you see below is an example of your three columns.

Fixed Expenses           Variable Expenses            Discretionary Expenses


This chart was easy, right? Now lets start filling in the columns so we can see where your spending habits fall.

In the first column you are going to write down all your fixed necessities like rent or mortgage payments, cell phone and car payment. These payments can’t be adjusted easily so they belong in the first column.

In the next column, Variable, or  necessity with wiggle room you write down all your monthly payments like electric or utilities, food or grocery, credit card payments, etc. These are necessity but are variable every month.

In the last column, you write down the discretionary spending like entertainment, travel, hairstyling and nail care, things that you can live without.

Now that you have all your monthly spending wrote down, to find extra money you start slashing away at the expenses in column three. This will probably be the hardest part of making and adhering to a budget. For example:

Fixed Expenses

$500.00           -rent

$288.88           – car

$85.00              – cell phone

$873.88              Total

Budgets are one of the most powerful tools you can use to achieve money goals, so it is important to make sure your budget is executed in alignment with a set of financial goals.

Another way to use this tool is by using the online tools and services offered by most large banks, credit unions that automate this process.

For example, you can use your bank’s ‘bill-pay’ feature for  any payments that are not variable. Just remember to always leave enough money in your checking account to pay these automatic debits.

For savings you can use your banks transfer to savings feature to set up automatic fund transfer from checking to savings. For all other expenses, including gas, groceries, spending money, etc., leave money in the checking account and access it via debit card.

A very famous man on talk radio, Dave Ramsey, suggest to not use a debit card because mentally it doesn’t bother you as much to use it versus spending cash. He suggest for all other expenses you use the envelope trick.

The envelope system is for every payment that is in your monthly budget, you withdrawal that money from your bank and put each payment into a set envelope for that payment.

For example, your grocery money you put in your grocery envelope to use to buy food. If you have spent all the money from the envelope, then it is gone. You can’t buy food until you put more money into the envelope.

I don’t feel that the envelope system works well for me, so I don’t adhere to it. If this system works for you because it forces you to budget (save) money, then by all means do it.

The sad thing to remember is that for the most part, most Americans overspend. Pamela Yellen, author of “Bank on Yourself,” says they take on too much debt and fail to invest wisely for retirement. She advocates using the 10/10/10 savings formula to set year round financial control of your money. Set aside 10 percent of your gross income for short-term needs, like vacation, or holiday gift giving. Set 10 percent aside for an emergency fund like for unexpected repair expenses, like for car, or appliances. Then set aside 10 percent for retirement.

Dave Ramsey’s philosophy is to save up an emergency fund of 6 to 8 months worth of total monthly expenses, plus add 15 percent of your gross monthly income for retirement.

This beginners guide to budgeting is a start to your financial strategy for wealth building. It is not a system to stop you from enjoying the fruits of your labor but to help you control your spending. It allows you to live like no one else, so that you can give like no one else.

I look forward to any comments you may have about my article, and any article I have listed on this website. I encourage you to take on a more responsible role in your wealth building routine and not depend on others to do it for you.


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