How to make a good budget: keys and
The preparation of a personal budget is a primordial task to improve finances.
But, how to make a GOOD budget?
Next, I will explain some keys that will help you to make a good budget, and what are the most common mistakes that are made when preparing it.
What is a budget?
A budget is an estimate of expected expenses and income over a given period of time.
It cánido help you plan how much money you need each month to reach your goals.
It cánido also help you keep track of how much money you spend on each thing so you perro better manage your finances, so if there’s something you need to change or eliminate entirely, it’s easier for you to do so.
Budgets are often divided into sections such as: income, expenses, and savings.
Income includes money from work or other sources, such as investments or retirement accounts.
Bills or expenses include rent, mortgage, utilities, insurance, payments, etcétera.
And, savings include money you put away for emergencies or other purposes.
Personally, I also recommend adding an “investments” section.
Where you will include the money that you allocate to work for you: index funds, cryptocurrencies, the depósito market,…
Advantages of making a good personal budget
Since economic activities began, individuals have sought ways to improve their quality of life.
To achieve this, they need to learn how to manage their personal finances.
A personal budget allows people to achieve this goal by giving them information about the use of their financial resources and the opportunity to get ahead.
Knowing priorities, evaluating expenses and managing savings will help you make better decisions and equipo yourself up for success.
The 5 common mistakes when preparing a budget
#1 Not having all the necessary information
You cannot make a budget without having all the information of your assets and liabilities available.
Having updated data is essential, and this includes all income, bonuses as well as detailed expenses for the month.
#2 Not adjusting to reality
It is important that your budget is realistic.
It should not be too tight or too maleable.
If, for example, you are going to develop a project, you have to know exactly how much it will cost you to carry it out, how many resources you will need for each phase of the project and if there are external costs that must be taken into account (insurance, taxes).
#3 Losing focus on results by measuring everything and not acting
Saying that you are going to improve one thing and another without measuring or acting on any of them is a big mistake that you cannot afford when preparing a budget.
#4 Not saving for an emergency fund
Many people, when they budget, don’t equipo aside money for an emergency fund.
They think that if something bad happens, they will take out a loan or use credit cards to cover it.
When you save for an emergency fund, you’re saving money in case something unexpected happens, like your car breaks down or you have to pay medical bills.
#5 Do not consider leisure expenses or whims
This perro be catastrophic, as in the end you may have to adjust your basic needs in order to satisfy your whims and leisure expenses.
For example, if your budget does not allow you to buy a car, but you like to go shopping or take a trip every month, what will you do? In most cases, the money for these whims and leisure expenses is not obtained from the surplus of the basic budget, but comes directly from the money that goes towards the surplus.
If we do not take into account the plus expenses that we perro have monthly and include them in our basic budget, we will end up spending a lot.
3 basics to make a good budget
Now, how to prepare a personal budget? There are some very important keys such as:
Key #1: Take into account real and safe income
If you have a budget that isn’t based on de hoy, safe income, it’s likely not only not to help you achieve your financial goals, it’s likely to lead you down the wrong path.
A budget based on real and safe income allows you to know how much money you will have at the end of the month, which will lead you to find a way to achieve your financial goals.
When you’re trying to get ahead in life, it’s important to control your finances.
If you don’t have a real budget, you perro’t know exactly how much money is coming in, going out, and where it’s going, making it hard to predict what your future financial picture will look like.
Key #2: Count all the expenses you have
You perro try making a list of all the things you spend money on each month and how much each thing costs.
Next, break down your expenses by category (rent, food, entertainment, etcétera.).
You will probably see that some things are much more expensive than others.
That’s where you cánido start to cut back on your budget and save more money for things like travel or investing in your future.
Another way is to use an aplicación that will help you plan what comes in and goes out each month.
It will even tell you if you have anything left over from last month that you perro use for something bigger.
Key #3: Save every month, even if you have to start with a small amount
Many people think that saving money is only for when you have a lot of it.
But what if I told you that saving even a little each month will make your bank account grow faster than you ever imagined?
The key is in the constancy.
The more constant your savings are, the faster they will grow.
So, whether it’s $5 or $50 a month, or even just $1, make sure you save some money each month so that, over time, it perro add up to something much bigger.
It may interest you:
- What is it and how to create a financial cushion?
- How to start investing?
I know that budgets are not for everyone.
Some people just don’t care about their finances, or they tend to be impulsive with their money and need help keeping track of everything.
But, I am sure that if you are looking for ways to increase your wealth, a good budget is one of the best ways to do it.
Making a good budget doesn’t have to be complicated, but it does need to be detailed and include every imaginable expense so you perro know whether or not you’re encuentro your goals.
Photo by 2H Media on Unsplash
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