We all like to spend money and keeping track of that money is part of maintaining a healthy budget. Budgeting allows you to see how much you are spending versus what you should be spending. Ideally living below your means keeps you in a good position to put the surplus in savings for things like retirement or emergency funds. According to the Economic Policy Institute, most American families approaching retirement have little to no savings. The figures really get concerning the more you factor in ethnicity, marital status, and educational gaps. That is why is it particularly important to create a personal budget that can grow to keep you on the right track as your life changes. Some of the basic variables for calculating your personal budget are:


Expenses can generally be broken into two groups, Fixed and Variable. Fixed expenses are monthly costs that stay the same, such as your mortgage, rent, or car payments. Variable expenses are costs that can change each month, such as utilities or groceries. You can do this by writing it all down in a budgeting spreadsheet or download an app like Mint and keep track of EVERY BIT of your spending.


Calculating income is your next important step. Income is the total amount of money you have coming in every month, minus taxes. Be sure to include things like child support, alimony, public assistance, and rental income.
Once you have these two variables calculated you will know what type of goals you need to set for yourself or your family. You can then move onto figuring out your goals.


Determine what your budgeting goals are, and be as realistic as possible. Trying to cut out too much, too quickly will make it very difficult to maintain long term. The first thing you must figure out is if you are living above or below your means. Do you need to cut back some of your spendings or do you need to figure out what to do with your surplus funds? Knowing the answer to these questions will help you determine not only what your overall goal is but help you begin to identify the baby steps that you can take to achieve them.
If you need to cut back simple measures usually add up over time. Eating out at restaurants less, discount grocery stores, and paying for things in cash can all be helpful in reducing monthly spending.
What if you are lucky enough to have money left over each month? Some of your goals could be paying off high-interest loans or credit cards or to save for retirement, emergency funds, or for a down payment on a house.
Having a personal budget will give you peace of mind and confidence in your future financial decisions. You will have a clearer picture of your spending habits and how to reach your goals. Having a budget also allows you to take control of unexpected expenses. Did you forget to pay a bill last month? Did your car have a flat tire? For me, it’s so much less stressful knowing I already have a plan for all those things when they pop up unexpectedly. At the end of the day, putting extra work into a budget ultimately leads to better, more realistic spending, which means that your overall financial situation will be in better shape.