Forkids Business Guidelines

A personal budget is a document in which we quantify inflows and outflows of money that a person expects to have for a period of time.

In general, having a personal budget allows us to plan better use of our money (especially as regards our costs), and helps us to acquire the discipline required to meet as planned.

More specifically, a personal budget allows:

* Assess if we need more sources of income.
* Identify items where we spent a lot of money unnecessarily.
* Identify items where we could reduce costs.
* Assess if we need to limit the acquisition of debt.
* Planning for the creation of a stock savings.

To better understand the concept and usefulness of a personal budget, then see how to develop and take advantage of one in six steps:

1. Identify regular income and expenses

We must first identify the revenues and expenditures of money that we used to have or perform for a period of time (preferably for a month).

This income or expense must be classified into general headings such as employment, investment, nutrition, education, services, etc.

For example, we noted how we tend to win the month due to our jobs, when we tend to win a month as a result of our investments, when we usually spend on food, how much in transport, etc..

We must identify all items that we generate income and expenditure, ensuring the most we can break them down (e.g., service line items could be broken down into water, electricity, etc.), and be as accurate as possible when estimating the money normally generated by each game.

2. Develop personal budget draft

Once we have estimated how much we used to have as income and expenses each month, we began to prepare the draft of our personal budget.

To do so, we developed a table (preferably in an Excel spreadsheet) where we include all items which we generate revenues and expenditures and the amounts that we expect to have in each of these items for the following months.

To estimate these amounts, we must evaluate and take into account our normal income and expenditure, but also our projections or financial goals.

For example, we usually spend on education 1000, for the next month we could plan to invest more in this game and, for example, calculate an increase in 1200.

Or, for example, we usually spend on entertainment 500 for next month plan could limit spending on this item and, for example, calculate a decrease in 400.

3. Develop personal budget

Once we have prepared the draft of our personal budget, we will analyze it in depth, and make adjustments or changes as necessary.

The first thing to do is look at the balance at the end of the budget, which is the amount resulting from the difference between total revenue and total budgeted expenditures, we must ensure that it is positive, and is an appropriate amount (it is recommended that corresponds to at least 10% of total revenues).

Should we not be adequate to evaluate whether we could generate more income, for example, seeking higher sales in our business, or looking for new sources of income?

But above all, to evaluate whether we could reduce costs, e.g. by removing some items in our budget (for example, subscriptions to magazines that do not usually read), or reducing costs in some (paying more attention to those items where we are spending lot of money).

4. Make a good destination of the balance

Once developed our personal budget, we plan a good destination resulting balance, which, as we mentioned, we must ensure that appropriate to at least 10% of our total revenue, although the ideal is that it corresponds to 20% or up to 30%.

As for what to do with the amount of the balance there are several alternatives, it is common to allocate the total of that amount to a bag of savings, which we use later in case an emergency happens, to acquire investments or to give us any pleasure.

Another option is to determine, based on the amount of the balance, a percentage of our total revenue (for example, 10%), allocate that percentage to a stock savings and balance the remaining money to take it as cash for expenses contingencies.

Another option is to divide the amount of this balance and give different destinations, for example, we could allocate a percentage to a retirement account, another percentage to a savings account, and another percentage to a stock investment.

5. Adjust to personal budget

The next step, once we have developed our personal budget and have planned a great destination of the resulting balance is to simply continue as planned.

The more discipline we have to keep our budget, better results will, however, in the case of personal budgets, the reality is that very few people who made one, followed to the letter, so if we have not come to follow to the letter, at least we constantly review and keep it always as a guide or reference.

But what should follow to the letter is to ensure that the balance amount corresponds to at least a certain percentage of our total revenue, and allocate all or part of it to a stock savings.

To achieve this, a council is to deposit this amount in a savings account at the bank (so we have it in a safe place and we are not tempted to use it), do this just have the money of our income whatever the we have to make payments (“pay us to ourselves first”), and, if possible, ensure that this operation is performed automatically (for example, ask the company where you work or where we have our bank account be responsible for allocating this amount to our account.

6. Constantly review our personal budget

Our personal budget should be reviewed constantly, even when they follow him to the letter, we must always review and have it as a guide or reference.

In addition, our budget must be flexible, i.e., we must always make adjustments or changes as necessary, always ensuring that our balance or the amount allocated to savings is growing.

And finally, we must always come to him before important decisions regarding our money or our personal finances, for example, we go to him to assess whether we can acquire some debt.

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