There are far too many of us who ignore the basics of personal budgeting and make the whole process far more complicated and less likely to succeed than it ever need be. The basics of personal budgeting are simply formatting our expenditure in such a fashion that it is compatible with our income and affords us a comfortable way in which to control our financial affairs and live our lives to the best of our ability.
When we begin to consider personal budgeting, the first step is to consider what our income is in relation to those fixed expenses which are unavoidable. Expenses which are unavoidable each week or month would include such as home loan repayments or payments or taxes for local services and utilities; they would not include such as our weekly grocery shopping bill or the fuel bill for our car. We have to be extremely careful in this respect that we make the required distinction correctly.
When we have looked at the above, we simply subtract the essential payments from our income in order to proceed to the next step.
We are now at the stage where we can look at affecting the extent of those expenses which although may be unavoidable, are by no means fixed in nature. This would include such as fuel bills, weekly grocery shopping bills and utility bills such as electricity, telephone and gas. By taking each of these items in turn and examining how we incur costs on them, we should also be able quite effectively to reduce the cost of a great many of them, perhaps substantially. Grocery shopping in particular is an area where a little bit of thought and effort can go a long way to making considerable savings in our outgoings.
We can then move on to look at what is ostensibly our disposable income and how we tend to utilise such on a weekly or monthly basis. Do we need to eat out so often when a home cooked meal may not only be significantly less expensive but a more healthy option? Do we really need a new pair of shoes every second week? Do we really need to redecorate or are we simply indulging ourselves unnecessarily? These are some of the questions we should be asking ourselves at this time. Of course we need to live and have some pleasures in life but by no means all of them may be necessary on as frequent a basis as we are used to.
As we trim our expenditure, we also have to look at how we can use the savings to make our lives more comfortable in the future. It may be that one of our fixed outgoings is a credit card bill which we just cannot seem to get under control. It would therefore be an excellent idea to start paying more to this bill each month from the money we have saved to reduce the interest we are being charged and the total outstanding debt.
The process of personal budgeting in this fashion should be an ongoing one and as time goes by, we will see the disposable income we have to hand grow as perhaps such as the credit card bills fall. This should make the overall process an ever easier one to perform, provided we never lose sight of the need to retain control of our finances and always live within our means.