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How to Create a Personal Budget

How To Create a Budgeting is a skill that doesn't come intui- tively for most; rather, it's learned. To get you on the path to financial fitness follow our Personal Budget guide below to creating a personalized budget. Personalized Budgeting What's the biggest mistake you can make in budgeting? Creating a budget without reviewing your current expenses. Why? Because you could assume you are over budget because of a shopping habit or going out too much on weekends. However, your real problem may be that your rent is too high, you're letting groceries spoil, or you haven't Personalized Budgeting Defined consolidated your student loans. Budgeting must be based on your own current expenses instead of by a Budgeting before reviewing your expenses is similar to throwing out a standardized one-size-fits-all formula. Why should you do this? pot of chili because you think it's too spicy before you even tasted it. Everyone's situation is different. Housing will always be a greater per- This graphic will show you how to create a personalized budget where centage of your budget if you live in a city like New York or San Fran- you base your new budget on your old spending, have defined fixed cisco, whereas rural dwellers will always have to budget more for gas expenses, and have goals for future months. and car maintenance. $150 The story of Sasha and Greg Sasha and Greg are married and bicker because they're routinely over budget by $150. Sasha thinks it's because Greg spends $150 per month on yoga. Greg is positive their budgeting woes are because Sasha spends $150 per month on guitar lessons. However, neither is right. Sasha and Greg's rent is $1,800. They overheard their neighbors talking about paying $1,400 per month for a similar apartment. Sasha and Greg contact their landlord and negotiate their next lease down to $1,400 per month. They now have $100 left over for savings without either one of them giving up a hobby. How Can You Create a Personalized Budget? STEP (1) Gather your spending Information Emint You can do this in several ways. Open a free Mint.com account, down- Create your own categories: For Sasha and Greg, they need load all your accounts into one, and Mint will put your expenses into hobby categories for yoga and guitar lessons. categories such as Entertainment, Home, and Food & Dining. Or you can review your bank account and credit card statements for the past few Caution: Stick to important categories. Having over 15 catego- months to create a handwritten budget or create a budget file using ries can squash your hopes of keeping track of all of them. Excel or other spreadsheet software. STEP (2) Visualize Your Current Spending As an alternative you can create a chart in Excel or draw a proportional bar chart. For instance Sasha and Greg's housing category is 6 times the size of their hobbies category. Create a chart with all of your expenses. Mint will do this for you in your budgeting tab. STEP (3 Review Your Current Budget No expense is fixed - Your rent, your student loans, and your credit card pay- ments can all change with negotiation. For instance, for rent/housing talk to your neighbors about what they pay. For student loans, call your lender and ask about alternative pay- ment plans. Your credit card may reduce your interest rate with a simple phone call. Review your largest expense first. While it may seem easier to start with your discretionary spending (the bi-weekly pedicure or Change your fun stuff last. Only give up or reduce recreation, the Netflix subscription), cutting or trimming these items won't entertainment, and hobbies if you can't reduce your major expenses have a big impact on the bottom line. Start where the money is. via negotiation. STEP (4 Set Goals If you manage to beat your budget, Set monthly goals such as saving for an iPod and longer-term you can allocate any surplus toward targets such as paying off your student loan. You can do this in one of your goals or put it into an Mint or add a "Goals" column in your handwritten or Excel budget sheet. emergency fund. Review your budget each month to stay on track. Record any shortfall or surplus. mint.com %24 %24

How to Create a Personal Budget

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If you’ve previously tried (and failed) to follow a budget, the problem may have been that you were using a formula designed for someone else, with different life circumstances. The best basis for a...

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