Personal Budgeting — Simple and Sound Advices for Your Financial Health

We are living in the era of consumerism society. We as citizens of the world have been surrounded by a lot of bait in front of us. The bait can be irresistible, but don’t foll yourself; it can create many problems in your personal financial and personal life. You should be armed with a good personal budgeting to tackle all the negative impacts of over spending.

How you know that you are not over spending? The basic principle of personal budgeting is as simple as this: your spending must be less than your earnings. Here we discuss some instruments that you need in better managing your personal budgeting.

First thing first. The first financial budgeting lesson is to allocate your spending. Before you do something with your hard earn money every month, at the beginning of current month create a list of all your monthly expenses. At each expense in your list, allocate a separate fund for each expense. You should pay priority to pay each expense and if there is money surplus, it is left to you to use it for other purposes.

You know how hard it is to save money, don’t you? But if you devote your time to save money regularly, you will come through. Develop a habit to save money regularly and on long term basis. How much you must save each month? Actually, it is not depends on how much your earnings, but more on to your age profile. If you are young —perhaps in your 20s to 40s— then a substantial part of your investment should be in selected quality equities. These can be in the form of good stocks or mutual funds.

Remember the proverb in investing: Don’t put all your eggs in one basket? There you go, don’t put all your savings into one kind of stocks or mutual funds. Diverse them! You should invest in a staggered way, over a long period of time. This method will give you benefit of ‘dollar cost averaging’. You can refer to a SIP (Systematic Investment Plan) to get the same benefit for mutual funds. Preserve the investments over a long period of time should you have a longer investment horizon.

You must have heard or have experienced first hand the roller coaster of stocks market. If much of your investment are stocks and mutual funds, then how you balance the volatility of equity market? In this case, you should allocate a fraction of your savings on the high quality Debt Funds. If you convenience in saving in form of precious metals, go for gold. It can be in the form of 24 carat gold or plain exchange traded Gold ETFs. This is because both can be sold and bought in the stock exchange like equities easily.

One precaution for you is not to trade in the stock market directly, if you are not a professional stock trader by job. Stock market is not place for you to running a risk of loosing all your saving. Do your homework first, make a lot of research goes before investing into stocks fruitfully.

If you still pay mortgages then it is a wise decision to make a list of your credit obligations if you have, like personal loan or home loan. It is a wise decision to buy a term insurance where the amount equal to or more of you credit obligations. This is to prevent you or you loved one to suffer in case any unfortunate event happening to you. Nowadays a term insurance is cheap and renders a better coverage for a less substantial premium.

If you do not have health insurance, make it as a first priority to get one. This is to pay your next medical expenses. If you have a credit card, make your best effort for paying outstanding dues. Pay all of them, not only minimum amount due. This is a credit card for poor credit trap you should know and avoid them. It will save you from changing—usually increasing— interest rate. Keeping more than one credit card is not advisable; you should have a maximum of two.

In addition to all above tips for financial budgeting, try to recognize and avoid a compulsive spending habits behavior such as frequent eating outs, watching movies, shopping, etc. Well, if you are old do not invest in stocks or equities, since you are having s short investing horizon. You should maximize part of your investing pie into government bonds and papers and quality debt funds. And, of course, do not go beyond your minimum spending either. Never make any emotional decisions to take your pension funds before maturity, even if an unfortunate bankruptcy happened to you, the court may not affect your pension account.

Those are some financial budgeting and financial tips that you can easily follow without making a tremendous change from your current financial habits. Personal budgeting is as easy as to not spending more than what you earn. In financial budgeting, try to make a simple and sound investment choices based on your age profiles which determined your investment horizon.