MAKING A SIMPLE PERSONAL BUDGET

Choices must be made concerning spending and savings. Can you afford another cell phone? Can afford to save? Can you afford not to save? Can you afford to invest? Can you afford to live at Masaki? You can find the answer to these questions. With a budget, your choices and alternatives become clearer, and you can learn to use money effectively.

Step 1 Know Your Real Income

List all sources of money you can rely on. Money sources may include allowance, part-time job, errands, and interest on savings. If you have a job, note all deductions from your paycheck.  Record only your take-home as income.

Step 2 List Fixed Expenses

Fixed expenses are set in advance and they must be paid regularly. Examples are car or rent payments, auto insurance premium and tuition. Many people include savings as fixed expenses because they regularly save a part of their income.

Step 3 List Flexible Expenses

Flexible expenses are necessary but changes with circumstances. Food, clothing, gasoline, cell phone recharge voucher are examples of flexible expenses.

Step 4 List Optional Expenses

Optional expenses vary and are not always necessary. They may include entertainments, personal care or school supplies.

Step 5 Total Income and Expenses

Compare income and expenses. Obviously, expenses should not exceed income. Most people cannot follow their budget exactly. One expense may turn out to be higher than planned, while another may be lower.  A consistent pattern of overspending suggests that the budget should be readjusted or followed more closely.