Learning to manage personal expenses can be a crucial part of maintaining a balanced and stable budget. Through bad management habits, many people are completely unaware of how their money simply slips away. There are several simple strategies that can help a person manage personal expenses with ease.
Before personal expenses can be managed, data on spending habits must be tracked. At the beginning of a month, try to make an educated guess on how much money goes toward personal expenditures, such as entertainment, transportation, bills, rent, and other costs. Then, for one month, write down every purchase made that could be considered a personal expense. This can be done using simple spreadsheets, credit card and bank statements, or even handwritten lists. Comparing the data to the guess can give an idea of how accurate his or her conception of expenditures is, while also providing a clear month of data about exactly where money goes.
After the data has been recorded, it is time to analyze it. Create two categories, one for essential expenditures such as bills, gas, food, and rent, and one for non-essentials such as entertainment or recreational purchases. This can help identify areas where personal expenses can be cut down, and where they cannot.
Based on this data, an important step to managing personal expenses is to create a realistic budget. If a person is trying to save more money each month, this may mean cutting down on non-essentials to add to savings. For those trying to trying to reduce debts, this can mean diverting some funds into paying down credit cards or debts with high interest rates to get rid of them faster. People who have just gotten a raise or a new source of income can also use a budget to determine where they can expand expenses if so desired.
One great way to stick to a budget geared toward managing personal expenses is to use cash. If a person withdraws his or her entire entertainment budget for the month at the beginning, the cash can be used to fund any recreational or extra purchases and activities. This allows a person to know exactly how much money he or she has available and how much has been spent simply by looking in a wallet, rather than trying to estimate remaining funds minus credit or debit purchases on the fly. While this may be impractical for some uses, such as automatic bill-pay services or rent, it can be a great way to manage smaller purchases more carefully.
