Ideas For Individual Financial Budgeting
One of the things that we are not taught to do as children is how to balance the
checkbook and manage our money effectively which unfortunately impedes our ability to most effectively use our resources without going into debt. In fact, the idea that we have finite resources and must make choices is at the heart of economic theory. This is also the core idea in personal finance budgeting: making choices when there is only a finite amount of money.
The process begins with surveying each of our personal financial landscape. This can be accomplished by looking through the last few months of credit card transactions as well as a list of bank transactions. Each transaction should be categorized in some way. An example of this is the category of food, where one might put costs related to groceries, as well as eating at the company cafeteria. Other categories include entertainment, utilities, and clothing.
With a list of recent transactions, we are able to start comparing the importance of different items. One way to do this is to presume that there are three kinds of costs. One, there are fixed costs that cannot be compromised, such as a monthly house mortgage or car payment. Two, there are variable costs that can be changed or modulated, such as switching to a cheaper coffee every morning rather than the premium kind bought at Starbucks. Three, there are costs that can be removed entirely.
In the following, we list out some types of transactions and costs and how to manage them.
The calling plan on a cell phone is not a fixed cost. In case you own an outdated phone plan, it may be costing you more than you need to pay. You can compare your cellular phone plan with others that might be suggested to you by identifying a good personal budgeting online place, entering your mobile phone plan info, then seeking comparisons. A comprehensive site offers a list of phone plans that are suggested in your city and will work with what you need.
Purchase of appliances is also a variable cost. A sizable appliance can be a challenge to your budget both in the purchase price and in the cost of energy needed to run the appliance. Most consumer sites will tell you to look into the energy star rating and the power requirements of any appliance you are thinking of buying. During the course of a year, consumers may be able to save quite a bit on energy expenses.
Finally, something like insurance cannot be eliminated (a fixed cost) but one can still take steps to decrease it. You may be able to get lower insurance rates if your job falls into a low risk category and is determined to be safer than most. If you are an accountant or a teacher or someone who works in another sort of safe situation, you might be able to get lower health insurance rates.
by: Nasreen Shah
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