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Your personal budget is made up of five basic elements. You need each of them to know how to best spend your money.
Spending your money is great, but not when you’re going into debt because of it. You need to set a budget. This isn’t a nasty word, nor does it have to mean that you cut out all your favorite things that you want to do.
It’s all about setting a budget that is realistic for you and your needs. That means getting to the five basic elements of your personal budget*.
5 basics you need to include in your personal budget
Yes, you need to know how much money you have coming into your bank account. This is more than just your salary. You’ll want to add up any child support and spousal support you may have. You’ll need to include government benefits, any other monthly payments you get, and anything that you can rely on.
There are going to be one-off payments now and then. I don’t tend to include them in my budget. I put them straight into a savings account to help build that faster.
Now you need to look at the expenses that you can’t get away from. These expenses are things like your rent, your utility bills, any payments you need to make to an ex that’s court ordered, etc. These are your essentials.
You’ll also want to include a food budget within this. You can’t get away from a food budget, but you can stick to one to help with saving money.
There will be some expenses that you don’t need to make. These are usually thinks like buying clothes, going to the hair salon, or getting that gym membership. Your streaming platforms will also be included in here.
Take a look at just how much you need to spend on yourself. While you don’t want to cut everything out, this is one of the elements of your personal budget to cut down on.
Next up is the debt that you have. It’s important to set up a plan in your budget to clear off the debt. You could do the snowball method of the avalanche method.
The aim is to pay more than just your minimum payments. You need to clear off the principal balance as well, otherwise it’s going to take years, if not decades, to clear your credit cards and loans. Set up a plan to work on one debt at a time while paying the minimums on all the others.
Finally, it’s all about putting money away for the future. This could be the part of your personal budget* that you don’t really look at right away. You may be a lot more focused on your debts and expenses, but you need to look at an emergency fund at the very least.
Your savings are going to help prevent you getting into more debt. Even if it’s just $10 per month, it’s something to start with and then you can build up to more.
Get in touch to find out how I can help you set a personal budget at no cost to you.