The health of personal finances begins with making a monthly budget that helps you achieve goals and better manage your resources. And stick to it, of course.
But what is a personal budget?
In short, a personal budget is a financial plan that allocates income to expenses, savings, and debt payment, as appropriate. And it shows if you are spending more than you should and on what.
It is, to call it in some way, a personal spending control tool that provides clarity about your current financial situation.
That's why today, we're going to share with you the step-by-step guide to creating a realistic monthly budget from scratch.
Step by step to create a personal budget:
- First, write down the income you receive each month, starting with your net salary (after deducting social security and other fixed charges). This will give you clarity on how much money you actually receive.
- Then identify and write down the fixed and mandatory expenses which you must assume each month as well. For example: the fee for your mobile phone plan, payment of public services such as water and electricity, food costs, monthly credit installments and others that yes or yes must be paid.
- Consider a reasonable but specific amount to cover the famous "ant expenses" like going out to eat from time to time, having a coffee with a friend, the ice cream you buy every time you pass by the gas station, taxi expenses and things like that.
- Finally, subtract your monthly fixed expenses and also the ant expenses from all your real income.
That amount you have left can be used to cover expenses for emergencies, to save and even to invest. If you can, set a percentage for each item.
And if that amount resulting from the previous operation is zero or even in the red, it means that you are spending beyond your income and can find yourself in tremendous debt in a short time.
If that is the case, you can take three actions to improve your financial health:
- Identify and eliminate expenses that I could remove altogether because they are not a necessity. For example: the fee for streaming services, music or newspapers on the Internet.
- Be aware of your habits and eliminate ant expenses. For example, replace the coffee you buy every afternoon at the convenience store in front of your office with a homemade coffee that you carry in a thermos from home. A thousand colones coffee for 20 days a month is 20 thousand colones that you can use in something else more important. And so with each of the ant expenses.
- Create opportunities to generate more income. For example, teaching at a university, offering online courses or selling crafts.
Finally, we recommend that you create or download an Excel template to carry your personal budget and consult it each month, showing the evolution of your finances.
And if you have already identified, thanks to this activity, that debts are drowning you, Contact us. We offer unification of debts so that you can pay a single installment and with better conditions than your current credits.
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