Personal budgeting isn’t talked about as often as budgeting for businesses. Tracking your income and expenses is something all households must do, especially if you want to save up, pay off debts and plan for your retirement.

Budgeting isn’t just good for businesses. It’s good for you at home as well. Tracking your personal expenses can help you increase savings, pay off debts, and give your mind peace. Knowing where your money is going identifies leaks in your pocket and helps you plan better for the future.

A budget is great for people who don’t know where their money goes during the month. If you want to save up for retirement, college funds or go on that cruise you’ve been thinking about, a budget just might help you.

Personal budgeting 101

Budgeting is quite simply listing your expenses and income. Make a list of all the big and small expenses you make during the month and deduct it from your income at the end of the month. The ideal situation is when your income is greater than your expenses.

Different kinds of personal budgeting

The difference between personal budgets is understanding your wants and needs. Needs are things you need to survive and function like an ordinary citizen. They include basics like your rent, utilities, water, food, car payments, childcare, etc. Other than that, are your wants like cable, extra clothing, entertainment and holidays.

Budgets are classified by wants, needs and retiring debt or savings. A general rule of thumb is to dedicate 50% of your income to your needs, 30% to your wants and the remaining 20% to paying out your debts or investment for retirement.

Low income or high expenses

A major challenge faced by people is when their income doesn’t cover expenses. If you’ve cut down to the absolute basics and still can’t make ends meet, you should look for additional sources of income.

Consider starting a home-based business around your area of expertise. Do some research on what kind of business best suits your skills and how to set up a business without raising capital. Also, look for part-time opportunities in your area that can supplement your income.

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