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What Is Personal Financial Budgeting?

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  • Written By: Geri Terzo
  • Edited By: PJP Schroeder
  • Last Modified Date: 23 April 2019
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    Conjecture Corporation
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Implementing a personal financial budget can be the difference between financial success and failure. Organization is key in personal financial budgeting, and it begins with determining how much revenue is being generated and how much money must go out each week or month. Itemizing bills and expenses is a major component of creating a budget, and complying with flexible items, such as discretionary spending, is essential to staying on task. Essentially, personal financial budgeting is a plan to make sure that an individual does not run out of money before the next paycheck comes around.

The first step to personal financial budgeting is determining how much revenue is coming in each week or month, although a monthly budget might be more practical. Income could include a salary, any alimony or child support payments, and any retirement or investment income that is steady. Combine those revenue streams to determine monthly income.

The next phase of personal financial budgeting is itemizing all of the monthly expenses. Ideally, there will be some money left over after all of these costs have been considered. Some money experts recommend that a mortgage or other house payment should not exceed 30 percent of total income. Mortgage or rental payments are one of if not the most important element to a personal budget.

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In addition to housing, other expenses include debt and taxes, car payments and insurance, food, and discretionary spending. Unexpected costs could crop up, and as a result, writing down where all out-of-pocket funds are directed each day can save some unnecessary surprises. Creating an emergency fund for unplanned events, such as a kitchen appliance breaking down, is another part of personal financial budgeting.

Setting goals is an important aspect of personal financial budgeting, especially when it comes to saving money. Knowing the anticipated financial status in one year, five years, or more will affect the amount of money that should be set aside, invested in the stock market, or placed in a traditional savings account. Certain goals could be saving for retirement, a new car, or a vacation.

To help with personal financial budgeting, there are computer software programs available that streamline the process. These programs require an investment and are often as simple to use as entering in the numbers into the appropriate categories. As a result, the budget is calculated automatically. Also, there are plenty of budget templates available on the Internet that can help to jump-start a budget.

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