Budgeting your personal finances need not be a daunting task.
Enjoy budgeting  with some practical tips

How to create a budget that works 

A budget is a spending plan. Budgeting your personal finances should be viewed positively, not to be treated as a necessary evil. Treat it as a vital money management tool and the cutting edge of your financial plan. Budget is a necessary step to  wealth creation and financial freedom.

To quote from John Maxwell, "A budget is telling your  money where to go instead of wondering where it went"

Budgeting your personal finances allows us to systematically allocate resources to meet our current and future needs

2. Keep a record of your expenses for 6 months

Make it a habit to bring a small notebook for this purpose where ever you are. The record serves as your reference in two ways. First, as basis for reflecting realistic amounts you will enter into your budget template. Second, as means of examining items  you can possibly cut down to match your income or cash inflow . 

3. Equip yourself with cashflow management strategies

Read  money saving tips  and make an effort to decrease major expenses. Reducing your expenses is a starting point for an effective exercise in budgeting personal finances.

Bills include electricity, water, internet, telephone and other utilities necessary for household upkeep. Include everything including quarterly, annual or seasonal expenses even the ones you are trying to forget. By the way, don't forget your real property taxes if you have them.

4.  Create your monthly income and expense worksheet

A  sample income and expense worksheet or budget template can be viewed here   You can customize this template to suit  your needs.  Delete expense items which are not applicable to you or your household and replace them with what you actually have. Familiarity with Microsoft Excel can be an advantage. 

5. Adopt the zero sum budgeting system

Apply a zero sum budgeting formula. In other words, you allocate all your income to the various expenditure items which already includes your savings and investments plan. 

A positive difference between total income and total expenditures means that you have to reallocate the excess. A negative sum implies that you need to go back and identify what item you need to reduce or remove. The process continues until you get a zero difference between total income and total expenditures. 

Again Microsoft Excel can facilitate the task.The program  can simplify the process of budgeting your personal finances.

6. Consider an envelope system

An envelope system requires setting aside the money for a particular budget category. You can buy or devise your own envelopes. Label each envelope with corresponding expenditure items found in your budget worksheet. On a monthly basis,  set aside indicated amounts and put inside the corresponding envelope labelled with the expense item or budget category.  

7Track your spending

Monitoring your finances requires diligence. Know where, how and why you spend your money. Adjust accordingly. Be reminded to make your spending plan a realistic one. Dont budget for wishful thinking.


Hope these tips for effectively budgeting your personal finances is helpful in making your own personal budget.

Have a great tip on how to avoid financial pitfalls during retirement?

I knew a lot of people who have worked hard during the prime of their life but only to end up helpless and penny less when they retire. Their pensions are not even enough to meet mounting medical and hospital bills . I've come to realize that we can no longer rely on employer sponsored retirement programs.

Have a great tip on how we can prepare for a comfortable retirement life? Please share it here.

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