Planning your personal finances is the most important thing you can do when it comes to trying to achieve financial stability. You will be able to know how much you spend per month on necessities, how much you can save each month, how much you have left over to spend on incidental expenses, and much more. This knowledge will grant you financial freedom – since you know how much you are spending, you will no longer have to worry about overspending or not saving enough!
Although it may seem like a lot of work, the first step in preparing to plan your personal finances is saving and recording everything. You must save every receipt, bill, and statement so that you can make an accurate budget. Then, at the end of the month, you can log your income and your expenditures, and examine which of those expenditures were necessities and which were luxuries. Once you have done this for a few months to establish a pattern, you can decide what your budget should look like.
The best way to create a good budget is to allow yourself flexibility in your essential purchases. In your budget each month, you should pay all of your necessities first – for instance, taxes, electricity bills, and so on – and then allow yourself a large margin for other frequent but irregular payments, such as debts. Then, with your remaining money, you should allocate an amount for retirement. Your leftover money should be put in the bank and spent on luxuries when necessary.
It may be hard to determine how much of your income should go to each section – essential purchases, other payments, savings, and luxuries – but it is different for each person. You can use a budget one month and see how it works, modifying it for the next month if necessary. Although budgeting may seem like a large task, it will pay off in the end. You will no longer have to worry about whether you can afford something at the store and have enough left over for bills – because you will have already planned it out. Stick with your budget, and the rewards will come.