How to make a budget the easy way to manage your personal finance

Budget should not be a pain. Budget should be a helper for you to manage your personal finance. Budget should be like a dashboard not a series of number that represent nothing. Your budget should make you see your personal finance, your money status at first view. The goal of this text is to try to show you how to make a budget the easy way.

Planning

Most people will tells you need to have a budget. But why? Because you should! No it's not a reason. Because you need to plan ahead, because it help to keep spending under control, because you can make priority. Those are some possible reason. Budget is a must to manage your personal finance, but an extensive detail budget is not always the best budget.

Manage your personal finance

I have a good memory and I'm at ease with cash managing, then when I had my very small money to manage at college and at university, my budget was on my head, but I had the plan for my personal fiance and it was working, I was in control!. Yes you need to control your money and a budget is a good tool to help you to manage your personal finance, but this also work to manage corporate finance.

After I used Quicken, my budget is around 25 categories when counting the 6 paycheck deduction categories! Yes its not so detail, yes I don't spend more then 20 minutes a month doing doing the follow up on my spending compare to my budget. But yes it's very effective. Why? Because my category are what they need to be for me. Yes category depends on the persons and need to fit the way the person spend money. For me I put a cash amount that is for all paid cash expense. (For convenience it also include my groceries that is 40$/week). I have a car fuel, recreation and restaurant categories that are paid on my credit card. Other categories includes clothing, 2 other car related, electricity, phone, subscription (CAA, cable, internet, all togheter) RRSP, saving account, household, taxes and mortgage. For me it's enough to have a good view of my personal finance. For me it's how to make a budget that fit my habbit

How to make a budget

Personally I make a budget for each of the next 12 months once a year in December for the next year and save it a base and work with an adjust one that is review according to what happen. Many will say that budget should not be change, I don't agree with that. don't change it because you buy a bigger grocery, but if you make a big unplan change you need to adapt and see how it can fit. For example: A car repair of 2000$ is not plan in the budget, the budget was 1200$ for all the year, you should put it in the budget and see how you can absorbed it using your budget. Possibly this can be a big problem if your personal finance ar tight or just an ajustment if you manage your personal finance with a buffer and your budget is in pretty good shape.

Budget is a fair projection of what should happen (usually an extension form the previous months and years) not your whish. If you want to make cuts on your spending, make the actual spending projection budget first. Then make the cut spending version of your budget that should be realist and should be accompanied by day-to-day actions accordingly.Planning to cut your groceries to 5$ per month from 120$ is probably not realist unless you change restaurant from 50$ to 3000$!

Reduce expense action planning should also be realist. If you go to restaurant 8 times a week cutting to 0 is probably not realist. Cutting to 4 and taking action to get 4 lunches a week for going to work/school to remove 4 restaurants is possibly realist if you have discipline and some believe you should do it. Why not 5? It's probably possible, but also probably not via the lunch since going out with colleague and not having lunch because of time/other constraints is the reality!

Budget should be what is expected not dreams or whishes

Follow-up

Budget is the planning; follow-up is to see in reallity how you d compare to the budget planning. This is the part why your budget categories should fit to your habit. If your budget categories don't fit you will have a hard time to keep track and this is the most likely reason you will not continue to follow-up and will not manage your personal finance correctly.

Follow-up should not be so difficult, some enter each bill every week for hours, even the milk from the accommodation, if it's your style go for it. But I don't need this detail and won't maintain it in the long run if it takes that much time and effort to do my budget planning and the follow-up. First the budget should look at the general part of your personal finance and spending. somethines you will fell the need to detail some part to see better where the money goes in some categories of your budget. you can split your budget category to see better some part of your personal finance. But keep it simple merging them back to a more general cbudget category after some times is often a good idea.

Tools to manage your personal finance