Drafting and adhering to a strict budget is a sure way of preventing impulse buying and the financial wastages that come along with the same. It is hence prudent for any shrewd spender to know how to do the same. Using the personal budget worksheet is, no doubt, a great way to achieve this end.
The personal budget worksheet is a template against which the finer details of the budget may be entered. It serves to guide you in the course of preparing your own budget. This template thus seeks to minimize any confusion and errors that might arise while prepping a budget.
Creating a Personal Budget
Knowing about everything to do with this worksheet is absolutely vital if the hope of achieving great ends is to be realized. We have prepared this discussion to unravel the details you would know ordinarily regarding this accounting tool.
Steps Involved in Budget Preparation
We kick off the exercise by examining the steps involved in preparing a budget. Below are the steps you have to go through to achieve this end:
Step I: List all the sources of your income
Start off by listing all the sources of your income over the period of time of interest. That will give you a clear picture of just how much you are to accrue and from where the money might come. It also eliminates any form of guesswork to allow you to work with concrete facts and figures. Example:
Monthly Salary – $1,000
Deposit Interest – $200
Rental Income – $250
Rebates – $75
Windfalls – $0
Total – $1,525
Step II: Sort the income and expenses
Next, sort the money into income and expenses. Create a table and go ahead to dichotomize your money in those two categories. Be detailed and meticulous to avoid any situation where you might overlook some expenses or incomes.
Step III: Assign a cap on each expense
This is now the core of the budgeting process. Here, you assign a cap on each expense. By assigning a cap, we mean drafting a maximum amount of money you might have to spend on that particular expense. Thereafter, draft a provisional subtotal to give you a rough clue of your anticipated expenditure.
- Housing – $800
- Gas – $500
- Food – $1,500
- Healthcare – $1,000
- Education – $2,000
Step IV: Rationalize your expenses
Rationalize your expenses at this stage. Rationalizing means adjusting the expenses in such a way as they fit within the budget space of your choice or intent. You have to figure out just how much you are willing and able to spend and then go ahead to revise your expenditure accordingly.
Step V: Save some money
Budgeting is perhaps the best time to consider setting aside some of your money in the forms of savings. Savings simply entail determining your expenses in such a way as to be less than your income. That may mean you are cutting down on some of the things you love most and dipping the extra in the saving pot.
How to Care for Erratic Incomes and Expenses
Not every income or expense you incur happens regularly. Some of them do happen at some periods that are beyond the normal scope or cycles. These have to be dealt with specially. This segment of our discussions endeavors to do just that.
Step I: Determine your budget cycle
First and foremost, you have to determine your budget cycle. This refers to the period of time within which you want your budget to be crafted. It could be monthly, weekly, or even yearly. Regardless of the choice you make, you have to see to it that it is comfortable for you.
Step II: Harmonize your income and expenses as per that cycle
Next, harmonize the incomes and expenses to line up with that cycle. If you choose a monthly cycle, for instance, divide the specific annual income or expense by 12 to find out a rough monthly estimate. If it is a quarterly basis, you will have to divide by 4 and so on.
Step III: Enter the Estimates in each cycle
Now enter that data within the cells provided for by the worksheet. Yet again, you have to exercise a great deal of caution to prevent any errors or mishaps from springing forth. Make any adjustments if need be to rationalize your expenses accordingly.
Analysis and Interpretation of the Budget Worksheet
Entering data in the worksheet is one thing. Analyzing and interpreting that data is yet another thing altogether. The analysis here entails reading the contents, comparing the trends, and taking appropriate courses of action.
If you happen to be spending more than you earn, you might have to cut down your expenses. Consider creating an emergency fund to cater for the rainy day if you spend less than what you earn for a prolonged duration of time.
To be able to draft a good budget worksheet, you have to rely extensively on some relevant templates. These are skeletons against which you enter the raw data. They offer the guidance you need to follow to get there well. Here are a couple of examples in Word and PDF which you may attempt to do this.
Why Should you Save Money?
Saving money indeed brings about many benefits. Below are some of the top benefits that accrue from such savings. They include:
Long-term Goals: You may save money for the sake of helping you to achieve your long-term goals. These could include college fees, debt repayments, and other expenses that may have to be taken care of only in the long run. These goals generally require huge capital outlay that may not be attained that easily.
Start-up Capital: Wanting to start a business? Yet again, you will have to save money for the course. Even though banks and other lenders can give you the start-up capital, these loans come at too great a cost. They often have the tendency to overburden you, the borrower, if not handled well.
Rainy Days: From time to time, emergencies do arise. You have to prepare for such emergencies as you may never know when the same might strike. Saving money faithfully is one sure way of prepping for such emergencies. The money so saved will definitely come in handy at such times.
Expensive Items: If you are planning to purchase a couple of expensive items like jewelry, cars, land, and expensive machine, you may also have to save at least for a start. Such savings, you may use to top up later to your borrowed money and money from other sources to be able to afford the item.
Financial Freedom: For your own long-term financial freedom, you have to consider saving. It is only by saving that you can achieve this end. Savings give you the capital you need to start a business that may eventually negate the need for long-term employment or reliance on donors and well-wishers.
Tips for More Savings
Separate your savings and expenditure
The first task is to separate your savings from your expenditure. Simply determine what constitutes a saving and what constitutes an expense. Then, separate the two of them distinctively going forward. That will help you to rationalize your expenditures keenly. Keep the boundaries intact all the while.
Cut down on your credit card
Move to cut down on your credit card expenses. They often attract huge fines and other penalties more so in the event of an overdue or late payment. Insist instead of the debit cards and cash transactions as they come at no costs on your part.
Avoid late payments
Always avoid remitting your payments past the due dates. Like with the case of credit cards above, such payments come at too great a cost on your part. You do not want to suffer the huge fines that are characteristic of such circumstances. Set reminders and timetables as a sure way of going about this.
Draft a budget and adhere strictly to it
Needless to say, you have to draft a budget and adhere strictly to it. It is the budget that guides you along the way of use. The document stipulates the timelines and the items you might need plus their associated costs of acquisition. Maintain some diligence in this for the best outcomes.
Open and maintain a savings account
As a long term measure, you may consider opening and maintain a savings account. This is a special bank account that is dedicated to the matters of savings and savings alone. It, unlike the demand deposits, does limit access and withdrawals that that easily exist. Thus it acts to safeguard your money in the long run.
Still worried about how to get started? Fret not! We have a free template for your consideration and use. The templates, much like the budget worksheets, have the skeletons that guide you on your way. They basically grant you the spaces wherein to enter the data and interpret the same thereafter.
Just download them free-of-charge and set your budget planning rolling well. Just to reiterate an earlier point, budget planning is an undertaking that should never be taken lightly as it may make a vast difference between success and failure. Do treat it seriously!