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Personal Budget

Importance of a Budget

When planning a budget for yourself, remember the following important details.

  • A budget is a spending plan.
  • A budget enables you to use your money wisely.
  • A budget enables you to make sure that your money covers all necessary financial needs.
  • A budget helps to control spending habits.
  • A household budget will better prepare you to live on your earnings.
  • If you do not live on your earnings, you will go into debt!

How to Prepare a Budget

There are many different ways to prepare a budget.

You are going to learn to prepare a budget using the “Six Step Method”. This method is a simple approach that can be easily adapted to fit anyone's needs.

  1. Determine your gross income.
  2. Determine any deductions that will be subtracted from your total income. 28% is a good estimate for the deductions from your paycheck.
  3. Determine net income.
  4. Determine fixed expenses.
  5. Determine the amount of spendable income.
  6. Develop a plan to manage spendable income.

What are Monthly Fixed Expenses?

Monthly fixed expenses include:

  • Rent
  • Monthly Payments
    • Car Payments
    • Insurance Payments
    • Utilities / Electricity
    • Phone
    • Water
  • Food
  • Personal Care
  • Savings (This is needed for those emergencies that may/will happen.)

 

Create a Hypothetical Personal Budget Plan

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