When you start personal budgeting, it is common to find your personal expenses totaling more than your income. That’s OK, provided you are ready to make adjustments and changes. You will either workout to increase your income or make adjustments to your expenses until your budget balances. Even though both options are viable, the later probably would be the quickest and easiest option to take.
However, whichever option you’ll choose, managing your personal expenses from the start is critical to the success of your personal budget. You’ll need to analyze, categorize and prioritize your expenses. That way, you’ll be able to easily make changes and do adjustments in your budget.
Why personal budgeting often fails
The reason people have so much trouble handling their expenses is because they have no idea what their expenses really are. Infact, some of the reasons as to why budgeting often fails are:
So, how do you effectively manage your expenses?
For easy management of your expenses through the budget, I recommend you divide your household expenses into:
Why categorize the expenses into fixed, variable and discretionary expenses?
This way you’ll find it easy to manage your expenses properly and when you want to make changes or adjustments in your spending, you’ll know which expense category to go after. Mostly, you’ll find that it’s the variable and discretionary expense categories that will be involved in balancing the budget.
One more thing, I almost forgot. You should carefully monitor how these two categories are doing i.e. the variable and discretionary; they are infamous for undermining people’s efforts to live by their budgets.
It’s very important to prioritize your expenses. Start from the top priority (these should include expenses that you can’t do without), medium priority and low priority. Discretionary expenses should be in the low priority group. Okay! I know the ‘good stuffs’ are in this category but as I said earlier, they can ruin your budget if not handled cautiously.
You can also visit our resources page for more personal budgeting worksheets.