Everyone is different, but one thing that we all have in common is that we all spend money. Some are more aware of their spending than others. Those who are highly aware of their spending habits are so for one of three reasons: they follow a budget, they have little to no income, or they are living paycheque to paycheque because they have extended their credit, beyond what they can afford.
A personal budget is the key to effective personal money management because it creates awareness of each and every dollar you spend. Outside of a loss of income, the most common reasons that folks cannot make ends meet are:
1. Lack of awareness of spending
2. Careless spending
3. Impulsive spending
4. Overuse of credit
When you are running on a tight budget any number of seemingly innocent things can send you into financial turmoil. Buying a vehicle or home that is too expensive or any unexpected expense, could spell financial disaster. Working towards better money management skills starts with refining your budget.
A personal budget should include all of your expenses, right down to how much you spend on coffee each day. Sometimes it can feel like our budget is tight and there is no room for improvement, but there often is room for improvement.
Your personal budget should consist of four sections. Housing, which includes your payments to rent, mortgages, property taxes, property maintenance and insurance. Transportation, which includes payments to vehicles, vehicle insurance, vehicle maintenance, bus/train passes, parking, gas, etc. Personal, which includes the money you spend on food, utilities, phone bills, entertainment, education, childcare and any other personal monthly household expenses. Finally, liabilities, which are the payments you make to loans, credit cards and other people you owe money to.
Prepare your budget in a table that has a column that represents the type of expense, a column that represents monthly cost and a third column that represents the areas in the budget that can be reduced. Go through your budget and indicate the places where you can save and by how much.
At times personal budgeting can be scary. It forces you to face your monthly expenses and if you can’t find ways to improve, you may feel deflated. Sometimes it pays to realize that you may need help with your budget. A professional financial counsellor will not only help you create an effective budget, but they also have access to other resources that may ease the process of achieving your financial goals. For more information about personal money management and money management skills through personal budgeting please visit http://www.debtcare.ca/