If you try to pay attention to too many financial experts, they'll have you convinced that creating a personal budget and savings plan is an enormous, highly complicated task. In reality however, all it takes is a critical look at your existing income and bills, then deciding what your financial priorities and goals are. Plenty of sophisticated financial-planning software applications exist to help automate most of the initial calculations and to help you track your budget and savings progress into the future. But all you really need to get started is a pen and piece of paper.
Write list of all your financial obligations. Include everyday bills such as rent and utilities as well as flexible expenses such as food and clothing.
Add annual and semi-annual obligations to your list, such as car registration and emissions testing.
Write down personal spending categories such as Christmas, birthdays and personal spending money.
Assign a percentage of your take-home pay to savings and write this amount as a dollar figure at the top of your spending list. Most financial advisers and experts recommend you set aside a minimum of 10 percent to savings.
Divide the remaining 90 percent of your income among the remaining spending areas on your list. First assign set dollar amounts to fixed bills and subtract each from your remaining income as you go. Then distribute the remaining funds to flexible and optional spending areas based on your personal priorities.
- "The Total Money Makeover: A Proven Plan for Financial Fitness"; Dave Ramsey; 2007
- New Mexico State University: Managing Your Money: Developing a Spending Plan
- Allocate monthly budget amounts to annual bills by dividing by 12 and semi-annual bills by dividing by six. Setting aside a piece of each bill every month ensures you'll have the full amount of money available to pay that bill when it becomes due.
Kathy Burns-Millyard has been a professional writer since 1997. Originally specializing in business, technology, environment and health topics, Burns now focuses on home, garden and hobby interest articles. Her garden work has appeared on GardenGuides.com and other publications. She enjoys practicing Permaculture in her home garden near Tucson, Ariz.