8 steps to making a personal budget

February 8, 2025

l

Hector Galicia

AaBb

Creating a personal finance budget is key to keeping track of your income and expenses, avoiding unnecessary debt, and achieving your financial goals. Here are the steps to creating an effective one:

1. Identify your income

  • Add up all your monthly income, including salary, extra income, rent, investments, etc.
  • If you have variable income, use an average of the last few months.

2. Record your expenses

  • Divide your expenses into categories:
    • Fixed costs: Rent/mortgage, utilities (electricity, water, internet), transportation, insurance.
    • Variable costs: Food, entertainment, personal shopping.
    • Occasional expenses: Vacations, car maintenance, gifts.

3. Distinguishing between needs and desires

  • Prioritize essential expenses and reduce non-essential ones if necessary.

4. Assign amounts and set limits

  • Use the 50/30/20 rule as a guide:
    • 50% for needs (rent, food, basic services).
    • 30% for wishes (outings, subscriptions, hobbies).
    • 20% for savings and investments.

5. Include savings as a mandatory expense

  • Save for emergencies (3-6 months of expenses).
  • Consider investments to grow your money.

6. Follow-up and adjustments

  • Use an Excel spreadsheet, a budgeting app, or a notebook.
  • Review weekly or monthly to adjust expenses if necessary.

7. Reduce unnecessary expenses

  • Cancel subscriptions you don't use.
  • Compare prices before buying.
  • Avoid impulse purchases.

8. Planning for financial goals

  • If you want to buy a house, pay off debts or invest, allocate a portion of your income to that goal.

A personal finance budget is an essential tool for managing money efficiently, allowing you to prioritize needs, control expenses, and achieve financial goals. Including savings as a mandatory expense and constantly monitoring it helps maintain economic stability. Discipline and the use of digital tools can facilitate its implementation, allowing adjustments as needed. A good budget not only prevents unnecessary debt, but also provides financial security and facilitates the achievement of short- and long-term goals.

DO YOU HAVE QUESTIONS? SCHEDULE YOUR FIRST APPOINTMENT? FREE WAY

Written by Hector Galicia

Comments

0 comentarios

Enviar un comentario

Your email address will not be published. Los campos obligatorios están marcados con *

Blog

Our blogs