Personal Finance: Baby Steps to Simplifying Your Budget

A personal budget is something everyone should be implementing on top priority. (Image: Pixabay / CC0 1.0)

If you thought a budget was something that corporate entities or governments apply to run their operations, this is going to be an eye-opener. A personal budget is something everyone should be implementing on top priority, regardless of whether you are a college student, a salaried employee with a family, or a business owner. If this is your first time making a personal budget, it can seem to be excruciatingly hard to implement, but taking the pain to make that first step will pay rich dividends.

According to “Budgets don’t guarantee success, but they certainly help to avoid failure. The budget is an essential tool to translate general plans into specific, action-oriented goals and objectives. By adhering to the budgetary guidelines, the expectation is that the identified goals and objectives can be fulfilled.”

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Having a budget helps you have an accurate assessment of your financial situation, manage your money smarter, and stay out of debt in the long term. Without a budget, you end up spending money on things you think you needed without ascertaining whether you can genuinely afford them. This could end up in a dangerous slide toward an ever-deepening debt pool.


Making an accurate assessment of how much you earn a month, what your monthly expenses look like, and how much debt you have in loans and credit cards is crucial to setting up a budget. Earnings are easy to calculate if you are a salaried employee. If you have an irregular income, the best practical way is to take the average of the monthly income over the last 6 to 12 months.

Be sure to enter monthly income, spending, and debt payments into a spreadsheet or database. You can then determine your net worth to get the ball rolling on budget planning.

The 60 percent protocol

A popular budgeting strategy dictates you spend not more than 60 percent of your monthly income on monthly expenses. (Image: Pixabay / CC0 1.0)

This is a popular budgeting strategy that dictates you spend not more than 60 percent of your monthly income on monthly expenses. The rest can be split up into categories for funding short-term and long-term savings, retirement plans, and debt clearances. Short-term savings is money you set aside for incidental non-recurrent expenses such as medical expenses, home/car maintenance charges, and money for buying gifts or small celebrations.

You should also set aside 10 percent for your recreational needs because what’s the point in earning money if you can’t enjoy it a little? If you are in a serious debt situation, you can pool a little extra money from these other categories until it is paid off.

According to, Richard Jenkins, the analyst who coined the term says” “60 percent isn’t the magic number, but it’s a round number that’s easy to remember, and it works for him. You can adjust the percentage to work for you and your financial goals.”

Make it automatic

Do not spend energy thinking about payment transactions every month. Set a date, and make it online, so that your monthly utility bills and/or loan payment amounts are automatically deducted from your account, all on the same day. You can call your service provider representatives and loan executives to change the due date for your bills and repayment schedule. This makes things much simpler in the long term.

Do the same for your savings as well. You can arrange for the stipulated amount that you have decided on as your monthly savings to be transferred from your checking account to a savings account every month. Once you have set this up, you eliminate the headache and responsibility of remembering to make these payments once and for all.

Credit cards

These pieces of plastic can wreak havoc on your budget planning. Use credit cards for emergency situations only and if you have to travel. Otherwise, make it a point to operate with cash or debit cards. When you set aside cash for managing expenses, the advantage is that you know exactly how much you are spending, and how much you have left.

Use credit cards for emergency situations only. (Image: Pixabay / CC0 1.0)

Making a budget plan work can be cumbersome in the beginning, but once you’ve disciplined yourself to stick to the plan no matter what, you’re bound to see the results over time.

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