Minding Your Personal Budget

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Category: Personal Finance & Saving

Personal budgeting is not so tricky and everybody can master it

Probably you have learned the hard way a basic truth about money – it is never enough! No matter how much money you make, you can always spend more than you earn. And what is worse, it seems that you spend money only on things you absolutely need, not on lavish extravaganza. Or is it really so?

Of course, it isn't. Nowadays people in developed countries spend money on so many things they can certainly do without that it really begins to look like lavish extravaganza. For instance, a cruise in the Caribbean is hardly something you can't survive without. Or a new fast car, which is always gas-hungry. It is sad to think that many people are so heavily in debt because of spendings like these but it is a matter of fact. But can't this be avoided?

Sure, it can. As the saying goes, if there is a will, there is a way. Right, in many cases avoiding debt is just a matter of will. And of wise personal budgeting, which is essentially a couple of old truths, that we seem to be constantly forgetting. Some of the really basic truths about personal budgeting are:

  • Impulse shopping kills your personal finances. Yes, it happens to everybody to be tempted to buy something when they see it. You can't always have a detailed personal budget that provides for everything you will need and even if you can, sometimes good bargains just popup and you can't miss them. However, if impulse shopping contributes to more than 5% of your personal budget, you need to take measures to cut it down.

  • Those tricky sales. One of the most tempting occasions for impulse shopping are sales. Many people just can't resist to buy something when its price is 25% or 50% off, even if they don't need it. Again, think about how much you spend on sales and how much of what you buy on sales you use later. A typical example are food items – you buy a whole box of wafers, for example, eat the first three or four with great appetite and when (finally!) there is only one or two wafers left, you already hate them. Honestly, if it weren't for the sales, you would have never bought a whole box of wafers, right?

  • Holiday spending sprees. This is another disaster in terms of personal budgeting. Probably Christmas is the most expensive holiday and you hardly save the whole year in order to have the money for the Christmas personal budgeting disaster. Additionally, throughout the year there are many other holidays that also rob your pocket (or your credit card, which seems to be the endless pocket of nowadays). If you can cut your holiday spending sprees in half, your personal finances will be much better off.

  • Possessions that are too expensive to maintain. Well, this is hardly everybody's chore but quite a lot of people own more than they can digest – cars, real estate, other expensive items. Real estate might be a good investment but if your running costs are staggering, then maybe you'd better sell this money vampire. The same applies to cars – having a fast car that is always gas-hungry, the insurance of which is half a fortune and which you use once a month is too much for a personal budget, unless you are millionaire.

  • Use a personal budgeting software to track your expenses. People have always used one kind of another of tracking their expenses and to keep their personal budget in order. There is a lot of personal budgeting software that can help you track how much money you make and what you spend it on. One advantage of personal budgeting software is that you can compare past periods (i.e. the same time last year, or two years ago) and see how you are performing.

These are just some of the ideas how to mind your personal budget. Of course, there are many more tips for frugal living, for instance how to cut your food expenses without staying hungry or eating junk save on food, or how to save on clothes, transportation, utilities, entertainment and these tips can help you additionally to master the science of personal budgeting.