Personal budget is the most important instrument when it comes to our financial life.
It is the instrument that helps us control our financial life when it comes to our income and expenses.
Living without a personal budget is like going through a very big city such as Bucharest without being from Bucharest and wanting to go to various places without map or GPS.
The personal use budget is made of a projected budget where you have to anticipate each expense and each income you make in a determined period of time and of an achieved budget, where you have to write all expenses and income you made.
The budget is useful both for persons in a difficult financial situation and who want to go over this period, as well as for people who want to plan their way to get rich.
Using this financial instrument can give you lots of benefits regarding your financial health, because the budget:
10 reasons you should use a personal budget
1. Helps you be aware of where you are spending your money!
It is the place where you plan and write all your expenses. It helps you see what are your money spent on and where you can make adjustment.
It is one of the most important options of the budget, because next is the financial planning.
2. Helps you know what are your income sources and how can you increase them!
It helps you plan your income. Most of the times, income is constant and you can hardly adjust it.
Most of the times, the budget helps you analyse your financial status and see if your income is enough for your expenses and for the financial objectives you set for yourself.
3. Helps you plan the expenses!
How many times have you realised that you are going shopping with the idea of buying something and coming back home with much more than you would have wanted.
The budget has its role of necessity. All things you should buy are written here, not the things you would like to buy.
It helps you make a difference between WHAT IS NECESSARY and WHAT YOU WOULD LIKE to buy.
Always choose WHAT IS NECESSARY to buy.
4. It helps you get rid of debts!
Yes, it helps you get rid of debts. Once you know what the income is and on what you spend the most, it helps you narrow the expenses and, with the money you save, pay your debts in a short amount of time.
5. Helps you avoid debts and spend as much as you produce!
Once the budget is planned, it guarantees that you will spend only what you produce. Your entire income should be larger than the expenses.
The difference between income and expenses represents the profit. With the profit you can pay your debts, start arrangements to buy a house, a car or to plan a vacation.
6. Helps you plan the purchase of a house!
The personal budget is your financial mirror. It shows you how much you earn and how much you spend.
It shows you how much profit you have in a month. This profit can be invested in a house.
For a new couple, that wants to buy a house, it is very important to use an internal use budget.
The house you can afford is the house that does not cost more than 2.5 times your total income per year.
The house you can afford = 2.5 * your annual income
It the result is higher than that, problems will occur regarding payment.
You can start with a smaller house and go to a bigger one after a while. Go to a bigger house only after you become the owner of the first house.
The budget helps you keep under control your expenses, house instalments and income without having financial problems.
7. Helps you be more structured and more realistic!
The budget helps you be more structured. It is designed as structured and as detailed as possible, to help you anticipate each expense by various expense categories.
Once the monthly budget is made, at first you will have many frustration reasons. In the first three months, you will not be able to plan your budget due to the fact that you are not being realistic.
You are subjective when it comes to the financial planning and you still think you will spend less and earn more.
Not true! You will spend and you will earn as much. The budget will show you this and will help you be more realistic with your budget each month.
You will end up being more realistic and more structured, not only with your money, but also in your daily activity.
8. Helps you save more!
Yes, it is the instrument which helps you save money from various places, in order to buy a product or to go in a vacation.
The budget gives you a faithful and real image of your financial status, where you can draw some conclusions regarding the places you can cut some costs.
With the money you cut, you can plan various expenses or you can reduce your debts.
9. Helps you have multiple income sources!
The budget is also an instrument for rich people, not only for those that have financial difficulties.
With the help of a budget, you can also plan some businesses you might want to make, invest in various mutual funds or in the stock exchange.
In order to get here, you must get rid of all other habits of yours that make you spend more than you produce.
10 .Helps you be more motivated.
The budget helps you be more motivated. It gives you the motivation to want more from your financial life.
It helps you get rid of debts, have our own house, go in certain vacations and buy different things you want.
It is the most important instrument for your financial life and gives you the financial motivation to want more from yourself.
While planning a personal budget can take few hours each month, the fact that you learn to use a personal budget can bring you back money you may have never imagined.
We are spending money on things we do not need and we are running into debts for things we do not need. Why are we doing this?
Because we do not know what happens with our personal money!
Planning a budget each month and strictly complying with it, you can reach peace and quiet in your financial life.
If I have convinced you that a personal budget is useful, you can start from now planning your income and expenses with the help of a personal budget model you can download for free HERE.
It is a model I have created and which I recommend to all readers of this blog.
If you still have doubts about its use, you can ask me anything related to the personal budget in a comment below.
I will answer to any of your questions.