Personal Budgeting Tips

In my financial advisory practice, I incorporated personal finance budgeting or personal budget planning for applicable clients as part of their comprehensive financial plan. As a financial advisor, I worked with highly affluent clients, who had more than enough cash flow and high income streams, that budgeting really didn’t make sense for them. I also helped upper middle class, middle class and working families for whom a household budget was important to their long-term financial success. A budget is a critical component of creating a successful financial picture. Personal budgeting strategies can help tighten outflows and preserve inflows. Here are some tips on budgeting:

1. Review your Monthly Outflow Expenses

Have a list of your regular monthly expenses, inclusive of all expenditures for various maintenance items, dining, entertainment, and hobbies. The list must include payments towards your debts. It is recommended that you use free budget worksheets that can be downloaded from the web, if not, just use paper/pencil to document your expenses.

2. Calculate your Earnings

Determine your total earnings per month, including any income from investments and other forms of residual income.

3. Ascertain your Budget Subtract Expenses From Earnings

Subtract your expenses from earnings, see what the result is. The end figure reflects approximately how much you will have left at the end of the month. The validity and accuracy of the end figure depends on the accuracy of your data.

4. Readjust your Budget as Needed

If the end figure of your budget calculation is not as accurate as it can be, re-evaluate your expenses and see if there are any opportunities to cut back.

5. Budget Must Include Any Debt Reduction Avenues

The household budget worksheet should include your monthly debt payments. If you have funds left at the end of the month, it may be possible to save money and pay off your debt at the same time. However, if there isn’t any cash left over, you might have to make some tough choice, sacrifices to get out of debt.

6. Assess your Financial Goals

What are your goals and dreams? Do your goals include, retirement by age 55, pre-funded children’s college education, saving for annual vacations, have a growing investment portfolio, or more. After you know what goals you are aiming for, it’s time to budget money to hit the bullseye. Survey your budget to discover the best avenues and time frames to reach your goals.

7. Practice Proactive Personal Budgeting Strategies

Once you have worked out the mechanics of a budget that covers your entire monthly expenses and financial goals, it’s time to become proactive and start “living” your new budget, see how it feels.

8. Appraise your Personal Budget

After the first month of the newly implemented budget, evaluate the budgeting process and see if the end results meet your initial expectations. If they don’t, then it time for self-reflect on to assess discrepancies and seize opportunities for improvements. Were your goals realistic, did some unexpected emergency thwart you budget goals, was more financial discipline required, or were there some other contributing factors?

9. Re-appraise your Budget Endeavor

If you meet your budget target at the end of the month, congratulate yourself, if not, it doesn’t mean the end. Seize the opportunity for self-reflection and make sure you do what it takes to meet your budget goals next month.

10. One Path Towards Financial Success

Your budget is one component of your overall financial picture. In order to make a personal budget successful, you have to be financially disciplined and be willing to evolve with changing financial circumstance. A great budget is always dynamic and evolving.