On the fifth day of the “Eight Days of Income Protection” we bring you five tools to create a personal budget, four steps to ensure financial security and income protection, three ways to get budget friendly long-term disability insurance, two tips for teaching kids about money, and one coverage we all need.
With the new year approaching fast, you may be thinking about your finances for 2016. Creating a personal budget and sticking to it is a crucial step in reaching both short and long-term financial goals.
The process doesn’t need to be complicated. There are several tools you can use to create a personal budget.
Before we discuss these tools, let’s begin by looking at why a personal budget is important.
Why is it Important to Create a Personal Budget?
A personal budget is a financial plan which allocates your income toward expenses, debt repayment, savings, and retirement planning.
A budget is an invaluable tool to help you:
- Understand your spending habits.
- Save for your future.
- Calculate how much money you’ll spend throughout the month.
- Ensure you pay bills on time.
How to Create a Personal Budget
To create a personal budget you will need to do the following:
- Set your financial goals. Understand your short and long-term monetary goals.
- Make a list of your regular income sources such as work, investments, loans, insurance, or retirement plans.
- Make a list of all your expenses including mortgage or rent, utility bills, car payments, insurance, loan payments, credit card bills, groceries, and entertainment.
Once you’ve accounted for your monetary inflow and outflow you can add it all up.
If the money coming in outweighs your outgoing expenses, you’ll have a surplus. If your expenses outweigh your incoming cash then you are in a budget deficit. This means you’ll need to make some adjustments such as cutting back on spending or finding new sources of income.
Tools to Create a Personal Budget
There are several tools you can use to create a personal budget.
Pen and Paper
Your personal budget doesn’t need to be fancy. If you’re not comfortable with technology you can simply use pen and paper. Keep a notebook specifically for your budget. Make sure to write down all your monthly income sources as well as your monthly expenses. Use a calculator to add it all up so you can determine if you need to make adjustments to next month’s budget.
If you already have Microsoft Excel or Numbers for Mac installed on your computer you can use these spreadsheets to create your personal budget. Enter your data each month into the spreadsheet to keep track of your income and expenses.
Both of these tools require significant manual data entry effort on your part. They also don’t provide you any analysis or suggestions for better management of your finances.
You can make your job much easier by using free finance tools available online. The following are three smart personal finance tools available online for your budgeting needs.
Mint is free web-based personal finance tool which automatically updates and categorizes your information in real time. It can bring together information from almost every US financial institution connected the internet. Mint analyzes your checking, savings, credit card, brokerage, and other investments and then makes recommendations that can potentially save you the most based on your lifestyle and financial goals.
BudgetSimple is a free, easy to use online budget. It is designed to help you find the best ways to get out of debt and start saving money for the future. The tool analyzes your finances, helps you create a budget planner, and makes suggestions on where you can cut expenses or grow savings.
Gnu Cash, is free and easy to use. This powerful yet flexible tool allows you to track bank accounts, stocks, income, and expenses. Based on professional accounting principles, it aims to provide you with balanced books and accurate reports.It’s a great way to get a comprehensive financial picture, as well help you keep track of your current progress.
Choose a tool that suits your needs to create your own personal budget. This will help you stick to the budget, which in turn can help you achieve your short and long-term financial goals.