You should use this $9600 number as your budget, not the $800 number.
Suppose you’ve tracked your grocery spending over a couple of months and you find that you spend $800 a month on average and it fits within your income and also allows you to save some money. Spending more than we earn only leads to debt, and that’s never a good thing, so we need to use our income level as the hard line for setting our boundaries. In the end, the goal of a budget is to make sure that we’re spending less money than we’re taking in in order to create positive cash flow. How do you decide where those limits will be? However, you still have to assign some firm boundaries to the upper and lower limits of the bands. So you’ve decided to use bands instead of lines to give you a little more flexibility in your budget. If your bands are too narrow, you may become frustrated with budgeting and give up on it. If your bands are too wide, you risk over-spending and running up debt. But in the end, you still need the upper and lower limits of your budget bands to be very firm. What do I mean by “firm but flexible”? If you think of your budget amounts as rubber bands rather than lines, you have some flexibility built in. Firm but Flexible Budgets Keep You in the Game Think of your budget amounts as bandsinstead. So how can you build a budget you can live with? Don’t draw a line. Uncertainty over where to draw the line on some items can lead to giving up on budgeting altogether. With this in mind, it’s easy to become frustrated trying to design a budget you can maintain month after month. How can we predict exactly how much we will spend on groceries or other variable expenses in a given month or year? While some expenses are fairly regular, others can vary by quite a bit from month to month. But a lot of us have trouble deciding how much to budget for each category. Managing our personal finances requires boundaries perhaps more than any other aspect of our lives.įor most of us, a creating an effective budget is the perfect way to set these financial boundaries.
#Personal budget planning free#
Without them, anarchy and chaos would have free reign. Boundaries are so important in every area of our lives.
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