Finance

Preparing A Personal Finance Budget

Personal finance is simply the money that is your own and is available to you for spending on routine expenses, paying the credits bills, making investments, purchasing future securities, making retirement plans and so on. As you can see, the finance available to a person is required to be put to different uses and thus, it requires to be managed through budgeting. Personal finance budgeting is a step-based process that can be easily practiced by following the tips given below.

Calculating the Income Flow

The first step for personal finance budgeting is to calculate your disposable income from various sources. It should be remembered that the monthly cash flow should be considered after deducting income taxes and other payments. For this, you can use one of the personal finance calculators that will help you to calculate your net monthly income in a convenient manner.

Calculating the Expenses

Monthly expenses can be divided into more than one category, as described below:

• Fixed expenses: These are the expenses that one has to bear every month. For example, the gas, water and electricity bills.

• Variable expenses: Variable expenses include those incurred on clothing, holidaying, entertainment and other such things. As obvious, these expenses can vary from one month to another.

• Emergency expenses: A person needs to keep a part of his or her income reserved for emergency expenses. These expenses can include medical bills, emergency car repairs, house repairs and so on.

• Monthly bills: Credit card bills are among the most critical monthly expenses that if left unmanaged can cause problems in life.

• Debt payment: If you have borrowed a loan, you have to reserve a fixed amount for loan repayment.
Calculate the Left Out

By subtracting the expenses calculated in the previous section from the net monthly income, you will get a value that can be positive as well as negative. In case the value is negative, you can consider yourself ineligible for further personal finance budgeting. In such a situation, you need to consult a personal finance expert and start from the basic level to manage your finance. For this, you might need to cut down your expenses or increase your net monthly worth.

With Positive Value

If you are fortunate enough to have a positive value after deducting monthly expenses from the monthly income, you can take further steps towards personal finance budgeting. This can involve:

• Investing in mutual funds, fixed deposits, stocks and other types of investments.
• Real estate investments to contribute towards your dream of possessing a home, if you don’t already.
• Retirement planning, so as to reserve finance for post-retirement years.

• Saving for emergency situations like medical issues and personal injuries on road.

• Saving for education of the children and so on.
By following all these steps every month, you can practice the process of personal finance budgeting conveniently. And once you become perfect through practicing, you can experience your personal finance bringing financial stability in your life.