10 Reasons to Have a Personal Budget

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"Personal Budget" is your friend!

You do not need to cringe, even though I just used the words "Personal Budget". We need to retrain ourselves from experiencing this phrase in a negative way. The images it conjures up – "control", "deprivation", "sacrifice" – are simply all wrong and need to be replaced with – "being in charge of one's finances", "transparency", "living open-eyed".

For some reason we have been badly trained, I do not know by what, perhaps by ourselves. It's time to start viewing a term like "Personal Budget" as a friend.

Yes, there are many benefits to having a personal budget – it's a tidy, disciplined, well organized way to deal with your money, but much more importantly it is your tool to make your money go where you want it to go.

The starting point is to actually know where your money goes. I guarantee you – if you do not have a personal budget and if you do not track your actual spending against it, you do not know where 10-20% of your money goes every month. That percentage can be even higher!

Personal Budget Template

Getting started with your budget is much easier if you have a budget template. It saves you time and it provides a certain structure to you already. All you need to do is start filling in the blanks. After you have all your numbers, the true budgeting process begins. The more attention you give it, the greater will be your reward. I go through a detailed example of just such a process in one of my instructional videos. In the end, you will have a road map to achieve your initial goal which inspired you to start a personal budget in the first place – you wanted to live better, to get out of debt, to retire early, etc.

So, let's boil it all down to 10 simple reasons you may want to create a personal budget:

  1. To find out where your money is going right now.
  2. To extract more money for savings.
  3. To find a way to build a house, quit a job, start a business, start school, etc.
  4. To pay off your debt.
  5. To live within your means.
  6. To prepare for major expenses like college, a new baby, a move to Europe, etc.
  7. To scale down after a divorce or serious illness.
  8. To evaluate your current business and decide if you want to stay with it.
  9. To prepare a reserve for unexpected expenses.
  10. To calculate the minimum income you can live on in periods of uncertainty.

Whatever your initial motivation for creating a personal budget, you will be surprised at how many additional benefits you will derive from it. Those benefits are hard to expect, because one never knows what increased awareness will bring you. And it's certainly different in each case. But that's what you will be gaining – an increased awareness about your finances, your goals and the ways you may choose to meet them.

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Source by Lucy Rudnicka

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