This is a post about money and spending and coming up with a personal budget plan that works.
Money seems to be a huge mystery to most people. It can cause a lot of stress.
Most people have a hard time with their personal spending and household finances. Money comes in, money goes out. But so many people don’t really understand where the money actually goes. More money ends up going out than coming in.
This is a problem.
The Importance of A Personal Budget Plan
I have always known the importance of having a personal budget plan. My mom was, and still is, a master financial person. My dad worked his ass off so we could have a very good middle class lifestyle. We never went without and my parents were never in debt.This was achieved on one income.
Unfortunately according to Gallup reports less than 1 in 3 Americans keep a personal household budget.
If you are not creating a budget and developing a spending plan you will find yourself with too little money and too much stress every month.
Getting a Handle on Your Personal Finances
Coming up with a personal budget plan that actually works means that you first have to sit down and figure out your net income for the month. This is your monthly take-home pay (not your gross income before taxes, but your net income—the actual amount on your check or direct deposit).
The next step is to determine your fixed monthly household expenses. These are the expenses you currently have in your life that require some of your income every month—no questions asked. The actual monthly expenses may vary (within reason) from month to month, but you know they are going to be there. They are fixed expenses.
My fixed monthly expenses include:
- car payment
- utilities(phone, internet)
- food(I do have to eat every month)
- savings fund
Your fixed expenses will differ somewhat from mine. I do try to live a frugal, minimalist lifestyle remember.
Figure Out The Difference
So now you have to add up all the fixed expenses to get a total. Then subtract this figure from your net monthly income and you hopefully have some money left over. This is your your monthly discretionary income.
So if I make $3000 per month and my monthly expenses are $2000 I would have a discretionary income of $1000.
So, if you do have money left over, congratulations! You have things under control with your household spending. You can spend that money however you see fit.
But…if you have a negative monthly discretionary income number there is some serious decision making that must take place.
Cut Expenses or Make More Money
The major problem with most people’s spending habits is that they just spend money willy-nilly. They have no sweet clue where the money is going on a daily basis. So you had better start tracking your expenses. It isn’t hard. Your online banking account will give you a very clear picture of where you are spending your money each month. ($125 at Starbucks!!)
So you have to cut your monthly expenses or you have to make more money if you want your personal budget plan to actually work. I am not saying this is going to be a cakewalk. You are going to have some very tough decisions to make in order to get your personal household finances on track. But it can be done.
Benefits to a Personal Budget Plan
Here are some benefits to having a personal budget plan:
- The plan helps you figure out wants vs needs. You thought you really needed a new pair of jeans huh? We begin to quickly realize which household expenses are truly fixed and which are not.
- The realization of your discretionary income can be eye opening. It will either surprise you in a good way or it will force you to make some hard choices if you ever hope to get ahead with your personal finances.
- You are forced to pay attention to your daily spending. You cannot spend frivolously. You have to pay attention and be mindful with your spending.
- Using a personal budget plan should reduce stress. Not knowing where the money is going every month is stressful as hell. Getting your personal finances in order will reduce that stress.
My own personal budget plan is on a whiteboard on my refrigerator. I see it every day and am reminded of how much I actually spend each month. That way I am also reminded that I do have to earn a certain amount of money each month in order to pay my fixed monthly expenses.
Using a Personal Budget Plan Will Help
Spending more than you make can seem fun for a while, but in the end, it can be misery-making. But now you are going to be proactive in your approach to your personal spending and finances. Using a personal budget plan will help you to get things on track.
Also, don’t be afraid to reach out for help from a professional financial adviser or debt counselor if you feel you need some expert advice.
Do you use a personal budget plan? How has it helped you with your spending and household finances?
Please comment and please be sure to share this post on social media. Thank you.
“Change The Code. Change Your Life.”