How to Make a Personal Budget

Video Transcript

"Present a topic on budgeting. Again, with the help of Expert Village, I hopefully will be able to help people and assist people in terms of developing a budget. In this clip, we're going to summarize the whole process. We've recreated all the expense items that we went in detail - the housing, utilities and so forth - and we've actually associated monthly amounts in our budget as an example. So through magic, I've added all these up, and these figures actually come up to 2,625 dollars. So that's our monthly expense. So, again, we know that our income minus our expense is equal to our cash flow. So let's say that our income is twenty-six hundred dollars a month; we already know that our expenses are twenty-six twenty-five per month. So that would give us a negative cash flow of twenty-five dollars per month. So again, the goal is to have positive cash flow. So what we would do is look at our budget and look at items that we could reduce the most, and have the most flexibility. Entertainment, the vacation and travel, and the clothing or gifts are the things that stand out as flexible items because you can modify those. So say we change our entertainment to a hundred dollars and we change our vacation and travel to a hundred dollars. So that would improve our budget by a hundred dollars. So that would decrease our expenses to twenty-five twenty-five. So that would reduce that to 2,525. So now that would give us an actual positive cash flow of a hundred and twenty-five dollars a month. So by going through the budget, looking at items that you can reduce that have the most flexibility that you have control over, are the things that you need to do if you're in a situation where you have a negative cash flow. So we reduce our entertainment, we reduce our vacation and travel by fifty bucks a month in the budget. That gave us more flexibility. Now we have a positive cash flow of 125 per month. Now that can be used to reduce our debt. So you know we had credit card debt at two hundred dollars a month. Now we can take this positive cash flow and use it to reduce that credit card debt and that's what a budget will do for you. It will identify ways where you can save, take the savings and focus on things that can reduce your debt."