5 Steps to Making a Personal Finance Budget - Every goal requires a plan and strategy to achieve it, as well as financial goals we need to make a budget plan to make it happen. Here are five easy steps we can do in making personal and family financial budgets.
1. Start By Determining Goals
The first thing that needs to be done is to write down our financial goals clearly and measurably, one of which includes the targeted amount of money along with the time period so we can evaluate it.
For example, "having an emergency fund worth 10 million at the end of December 2018". Furthermore, the targeted amount of money is divided by the number of months that exist from now to know how many monthly targets are.
2. Know Total Monthly Income
In making a financial budget we need to know how much income is earned every month, both from salary and other income sources. It is important to remember, the thing that is noted is the amount of money actually earned after deductions (taxes) or allowances (health benefits or pensions) for employees, or profits (net income) after deducting business operating costs for entrepreneurs, traders, or freelancers.
3. Calculate Total Monthly Expenditures
We also need to calculate how much money is spent every month. When calculating monthly expenses, calculate routine expenses (such as spending on monthly needs, daily meal money, transportation money, pulse money, debt installments, etc.) as well as non-routine expenses (such as doctor fees and entertainment).
Well for those of you who are confused, to be able to know exactly how much monthly expenses will be easier if during the initial 3-6 months we carry out the activity of recording each expense. Now to make it easier for us to do the recording process, we can use expense tracker tools such as the money lovers application.
4. Create a Realistic Budget
After doing the three previous steps, then we can start making a budget plan by reducing the total monthly income (step 2) with the accumulation of total monthly expenses (step 3) with the monthly target (step 1). If the value is finally positive, it means we already have a financial budget plan that is realistic and in accordance with the current lifestyle. Conversely, if the final value is negative, it means we have to reevaluate the financial goals, re-check our expenditure and income posts.
5. Check Goals and Expenses again
As already explained, if the budget plan (step 4) is negative then we need to re-evaluate the previous budget plan. Check which posts can be changed and adjusted, while still considering basic needs. For example, we can evaluate the priority of expenditure, which one still has to enter the budget, which one can be eliminated, or reduced the value of the budget.
In addition we can also reconsider the target of money and time lapse in financial goals, it could also be by looking for other sources of income to increase income, essentially the evaluation process can help us make a realistic budget.
