How to Balance a Personal Budget
Balancing a budget seems to elude the federal government, most states and many corporations across the country, yet individuals and families everywhere strive to do just that. It looks simple enough on the surface, having an income and living within your means. But how do you do it?
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Instructions
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Identify your reliable sources of income. They may be from a salary, retirement, social security, child support or even unemployment insurance. List all your sources of income and total them. For the purposes of this article, let us assume that adequate taxes are being withheld and we are working with net (take-home) numbers.
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Detail your expenses. Review your receipts, credit card statements and checking statements. Get a realistic idea of where your money is being spent. Any surprises? Is your money in sync with your values? Are you spending more than you make? If not, congratulations, you have a balanced budget! If you are like most of us, some of these areas need work.
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Understand the difference between wants and needs. Identify your fixed expenses that are truly needs. Some of our needs are food, clothing, shelter, utilities and transportation. One good way to determine how much we can "afford" for the various categories is to look at percentages of income for each category (resource below). If my rent is $950 per month, and I can afford only $450, I may need to look for a roommate. If I have my eye on a hot new convertible, but my transportation budget is $100, I may need to get a reliable used car or a bus pass.
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Align your money with your values. If it is really important to you to have the hot convertible, then look at other areas where you may be able to economize. Where are you spending your money that is less important to you than the convertible? Maybe you drop a chunk of change in restaurants every month. Is that more important to you than the convertible? Maybe you spend money on designer clothes. Could you be just as happy shopping the 40 percent off sales at J.C. Penney or looking for vintage finds at a thrift store? It is all a balancing act. You must decide if you are getting all of what you need and some of what you want out of your dollars.
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