Personal Budget for Financial Freedom

A personal budget is a tool to manage your personal finance. The objectives are to control your expenses to be within your means and stay out of debt. The other plus point is to include in the budget an amount to pay yourself first. With regular savings, you will be able to make your money grow and build your wealth. The ultimate aim is to achieve financial freedom.

A budget without debt

Income	Expenses
	Savings

From the diagram you can see that:

Total Income = Expenses + Savings

It is an ideal situation in which you are debt-free.

A budget with debt

Income	Expenses
	Savings
	Debt Repayment

The diagram shows that:

Total Income = Expenses+ Savings +Debt repayment

You will note that saving is still necessary even when you are paying off debt. The savings are for emergency purposes and when you are in such a situation you will not incur further debt

Income

Your regular income should be featured here. They are your salary, bonuses, part-time income, income from rental and other sources

Expenses

Expenses include the following:

Household expenses: They are groceries, utility bills, telephone bills, gas and building maintenance

Transportation: Petrol, parking and toll

Entertainment

Insurance

Income tax

Children’s expenses: Monthly allowance, books, tuition, stationery

Loan commitments: Mortgage and hire purchase loans

Donations

Savings

Emergency fund: This is to cover unexpected outlay such as medical expenses, car repair and other exceptional items not covered in the monthly budget

Big-ticket items: Save and buy in cash instead of getting a loan and incurring interest

Recurring Expenses fund: Money is to be set aside monthly for yearly, semi-annually and quarterly payments such as quit rent, assessment, car maintenance, road tax and car insurance. When an item is due you have the available fund to meet a payment.

Debt repayment

Most likely your debts are mainly from credit cards. You have to stop using the cards until the outstanding amount is fully settled

Variance analysis

Month:

Category	Actual	Budget	Variance
INCOME
Salary and bonuses
Part-time income
Rental
Other sources
TOTAL INCOME
EXPENSES
Household expenses
Transportation
Entertainment
Insurance
Income tax
Children’s expenses
Loans
Donations
TOTAL EXPENSES
SAVINGS
Emergency fund
Big-ticket items
Recurring expenses fund
TOTAL SAVINGS
Debt Repayment

Find out at the end of each month whether you are sticking to your budget or not. Identify the reasons and adjust your spending in the areas that you have overrun the budget or revise your budget to suit the current situation.

A budget is about self-discipline and self-control in avoiding material wants in life and stay out of debt.