Understanding Budgeting and Personal Finance

Why a Budget is Important in Personal Finance

A budget is a personal finance tool that helps you take control of your money. It is a written plan for how you will spend your money. It allows for making financial decisions in advance, making it easy to cover all your expenses as well as pay off debt, save for the future, and enjoy discretionary spending. A continuing budget can help you transform your financial situation and start the wealth-building process.

How to Create a Budget in Nine Steps

To create a budget, you should start by making a picture of your financial situation. It helps to have a list of the bills you need to pay each month, along with your pay stubs and bank statements or receipts from the past three months.

Step One: Determine Your Income

Estimate your monthly income, which should include any salaries you receive, as well as any income from other sources such as:

• Government assistance.
• Social Security.
• Investments.

Step Two: List Mandatory Expenses

Mandatory expenses are those that you must pay each month and are necessary for your housing, work, or legal obligations. These should include expenses such as:

• Rent.
• Electricity.
• Water.
• Heating.
• Internet.
• Food.
• Health insurance.
• Prescriptions you take daily or monthly.
• Childcare.
• Transportation to and from work.
• Family maintenance.
• Live TV.
• Streaming subscriptions.
• Dining out.
• Travel for leisure.
• Personal care.
• House cleaning.
• Interior decoration.

Step Three: List Discretionary Expenses

Next, identify your discretionary expenses. These are things you can live without but typically choose to spend money on. They are wants, not needs, and may include:

• Gym memberships.
• Clothing.
• Cable TV.
• Streaming subscriptions.
• Dining out.
• Travel for leisure.
• Personal care.
• House cleaning.
• Interior decoration.

Step Four: Estimate Expenses

Once you have listed all your spending categories, it’s time to assign monetary values to each one. Without looking at your spending patterns, write down what you think you should or could spend in each category each month.

Step Five: Compare Estimated Expenses to Actual Expenses

Now, go back to your spending history over the past three months and identify what was spent in each category monthly. You can use receipts or bank statements to find out what was actually spent. Compare these numbers to the figures you estimated.

Step Six: Set Spending Limits within Your Income

Once you know how much you spend monthly compared to what you think you will spend, it’s time to set limits on your spending. Plan for mandatory expenses first, then add those figures together and subtract them from your total income.

The remaining amount is what you can
Source: https://www.thebalancemoney.com/personal-finance-budget-4802696

.lwrp .lwrp-list-double{
width: 48%;
}
.lwrp .lwrp-list-triple{
width: 32%;
}
.lwrp .lwrp-list-row-container{
display: flex;
justify-content: space-between;
}
.lwrp .lwrp-list-row-container .lwrp-list-item{
width: calc(12% – 20px);
}
.lwrp .lwrp-list-item:not(.lwrp-no-posts-message-item){

}
.lwrp .lwrp-list-item img{
max-width: 100%;
height: auto;
object-fit: cover;
aspect-ratio: 1 / 1;
}
.lwrp .lwrp-list-item.lwrp-empty-list-item{
background: initial !important;
}
.lwrp .lwrp-list-item .lwrp-list-link .lwrp-list-link-title-text,
.lwrp .lwrp-list-item .lwrp-list-no-posts-message{

}@media screen and (max-width: 480px) {
.lwrp.link-whisper-related-posts{

}
.lwrp .lwrp-title{

}.lwrp .lwrp-description{

}
“`html
}
.lwrp .lwrp-list-multi-container{
flex-direction: column;
}
.lwrp .lwrp-list-multi-container ul.lwrp-list{
margin-top: 0px;
margin-bottom: 0px;
padding-top: 0px;
padding-bottom: 0px;
}
.lwrp .lwrp-list-double,
.lwrp .lwrp-list-triple{
width: 100%;
}
.lwrp .lwrp-list-row-container{
justify-content: initial;
flex-direction: column;
}
.lwrp .lwrp-list-row-container .lwrp-list-item{
width: 100%;
}
.lwrp .lwrp-list-item:not(.lwrp-no-posts-message-item){

}
.lwrp .lwrp-list-item .lwrp-list-link .lwrp-list-link-title-text,
.lwrp .lwrp-list-item .lwrp-list-no-posts-message{

};
}