Personal Budgets: What They Are and Why You Need One

Personal Budgets: What They Are and Why You Need One

Personal Budgets: What They Are and Why You Need One

Personal Budgets: What They Are and Why You Need One

June 11, 2023

June 11, 2023

June 11, 2023

June 11, 2023

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personal budget freedom
personal budget freedom
personal budget freedom
personal budget freedom

Do you ever feel like your money is slipping away and you’re not sure where it’s going? Or maybe you have dreams of making bigger purchases, but just don’t know how to afford them. If any of these sound familiar, it might be time to look into creating a personal budget. 

Creating a realistic budget can help provide financial stability while keeping an eye on your long-term goals. It doesn’t need to be daunting or complicated; with the right guidance anyone can construct a sound budget that works for them. In this blog post, we'll cover exactly what is meant by a personal budget, why having one is beneficial and some tips on how to get started building yours!

What is a Personal Budget?

A personal budget, or household budget as some people call it, is used to track the expenses coming in and going out for a household during a set period of time. Personal budgets are essentially a financial roadmap or plan to help you spend less and save more money. 

Do you ever feel like your money is slipping away and you’re not sure where it’s going? Or maybe you have dreams of making bigger purchases, but just don’t know how to afford them. If any of these sound familiar, it might be time to look into creating a personal budget. 

Creating a realistic budget can help provide financial stability while keeping an eye on your long-term goals. It doesn’t need to be daunting or complicated; with the right guidance anyone can construct a sound budget that works for them. In this blog post, we'll cover exactly what is meant by a personal budget, why having one is beneficial and some tips on how to get started building yours!

What is a Personal Budget?

A personal budget, or household budget as some people call it, is used to track the expenses coming in and going out for a household during a set period of time. Personal budgets are essentially a financial roadmap or plan to help you spend less and save more money. 

Most people set personal budgets because they tend to overspend their money on things they don’t need and want to stay on track financially. Weekly and monthly budgets are most common but some people like to make yearly budgets. 

While it may seem like budgets are easy to manage, it’s important not to fall for some of the most common budgeting mistakes when making your own personal budget. Underestimating your expenses, not having clear financial goals in mind, and not tracking expenses are just a few of these errors.

what is a personal budget

Who Should Use A Personal Budget?

Most people think that personal budgets are only beneficial to those who don’t have much money, but in reality they’re for anyone who wants a better financial future. No matter how old you are or how good your financial situation is, keeping a budget will help you in the long run. If you've ever thought to yourself, "I need money now" because you don't have cash on you, there's a good chance you could benefit from a personal budget.

For those who are looking to get out of debt, want to get rid of unnecessary expenses or have poor spending habits, a personal budget is a smart choice for you. Sticking to a budget can help ensure that you have the funds available when an emergency arises or unexpected expenses pop up unexpectedly.

Most people set personal budgets because they tend to overspend their money on things they don’t need and want to stay on track financially. Weekly and monthly budgets are most common but some people like to make yearly budgets. 

While it may seem like budgets are easy to manage, it’s important not to fall for some of the most common budgeting mistakes when making your own personal budget. Underestimating your expenses, not having clear financial goals in mind, and not tracking expenses are just a few of these errors.

what is a personal budget

Who Should Use A Personal Budget?

Most people think that personal budgets are only beneficial to those who don’t have much money, but in reality they’re for anyone who wants a better financial future. No matter how old you are or how good your financial situation is, keeping a budget will help you in the long run. If you've ever thought to yourself, "I need money now" because you don't have cash on you, there's a good chance you could benefit from a personal budget.

For those who are looking to get out of debt, want to get rid of unnecessary expenses or have poor spending habits, a personal budget is a smart choice for you. Sticking to a budget can help ensure that you have the funds available when an emergency arises or unexpected expenses pop up unexpectedly.

Why Is Budgeting Important

A good budget can help you to keep track of your cash flow, analyze your spending patterns, and adjust your expenses as necessary. Whether you prefer to write it down or use a tool like the Hiatus app, personal budgets will help you avoid headaches down the road.

With a little bit of effort and thought, creating a personal budget can be the first step toward achieving your financial goals, whether that is saving for a vacation, paying off debt, or investing in your future. 

Some of the reasons you should start budgeting include achieving financial independence, living within your means, and having a clear understanding of where your money goes. Additionally, having a plan in place helps reduce stress related to finances by allowing you to feel confident about your income and expenses, and to make informed decisions about how you spend your money. 

importance of budgeting

Why You Need A Personal Budget

If you're looking to take control of your finances, budgeting is a must. But with so many factors to consider, it can be tough to know where to start. Here are a few compelling reasons why it’s a good idea to use a  personal budget. 

First, a personal budget gives you total control over your money. By tracking your spending, you can start identifying areas where you can make improvements. Plus, you'll finally have a clear sense of how much you're spending on all of life's essentials-- from rent to groceries to nights out with friends. 

It’s easy to lose track of your finances and spend way beyond your means without a budget. If you do decide to create one, you'll have the tools you need to save, prioritize your spending, and achieve your financial goals-- all on your own terms. The Hiatus app allows you to create custom categories so you can see exactly how you’re spending your money. 

why you need a personal budget

Types Of Budgeting Methods

While creating a budget can seem overwhelming, it’s important to look at the different budgeting methods and go with the one best for you. Here are a few budgeting methods that you can consider:

  • Zero-based budget: Zero based budgeting is simply income minus expenses equals zero. This budgeting method takes into account all of your income being budgeted before it's spent. People with set incomes or at least have a ballpark idea of their income are good candidates for using this budgeting method. 

  • Pay-yourself first (80/20) budget: The two main focuses for the pay-yourself first budget are savings and debt repayment. If you want to follow this method, you should take 20% of your income, after taxes, and put it into a savings account. The remaining 80% should be used to pay for your expenses. 

  • Envelope system budget: Similar to the zero-based budgets, the envelope system involves withdrawing all of your income in cash and separating the cash into envelopes labeled for the different categories it will be spent on. Whenever you want to buy something which would come from a certain budget, you take the money from the corresponding envelope and buy what you need.

  • 50/30/20 budget: This method breaks down your budget into three categories - essentials, savings, and everything else. 50% of your income goes to essential things like rent, groceries, transportation, etc. 20% of your income goes to your savings and 30% goes to everything else (eating out, personal purchases, whatever you like to buy).

  • 70/20/10 budget: This budget is broken down into three buckets - essential expenses, savings and investments, and debt payments and donations. 70% will go towards your essential expenses like rent, credit card payments, groceries. 20% will go to savings and investments and the last 10% goes to any extra debt payments or donations.

methods of budgeting

How To Create A Monthly Budget

When it comes to creating a budget that fits your needs, there are some things that you should consider:

Determine your Monthly Income

Knowing how much money you earn each month is essential in creating a personal budget. This includes your salary, bonuses, benefits, and any other sources of income. If you’re self-employed or a freelancer, you can estimate your monthly income based on your previous earnings. Make sure to include all sources of income, including side hustles and passive income streams. If you're making $10,000 a month or $2,000 a month, you'll be able to know how to budget your money better.

Track your Monthly Expenses

The next step is to track your monthly expenses, including food, housing, utilities, transportation, entertainment, and other miscellaneous costs. The Hiatus app is a perfect tool that will track all of your expenses in one place. You can categorize your expenses and make a list of your fixed and variable costs. Fixed costs are those that stay the same every month, while variable costs fluctuate month to month.

Set Realistic Goals

Now that you have a good understanding of your income and expenses, the next step is to set realistic savings goals. This step is crucial in creating your personal budget since it helps you determine your monthly savings target. Decide how much money you want to save each month and allocate a portion of your income towards that goal. Make sure it’s achievable and reflects your financial priorities.

Reduce Unnecessary Expenses

Reducing unnecessary expenses is one of the most effective ways to save money. Evaluate your expenses honestly and identify where you can cut back without sacrificing essential needs. You can start by eliminating subscriptions you don’t use. In this day in age, most of us subscribe to just about any streaming service. Why not switch to just one? An app like Hiatus can cancel any unwanted subscriptions for you. 

You can also switch to a more affordable grocery store, reduce dining-out expenses, and even look to get lower rates on your monthly bills to help cut costs. The Hiatus app can also see how much you spend on your monthly bills and negotiate better rates for you. Small changes can make a big difference in your budget.

Monitor and Adjust Your Budget

Monitoring and adjusting your budget is an ongoing process. Revisit your budget monthly or quarterly to see if you’re staying on track with your goals and lifestyle. If you find it hard to stick to your budget, you may need to adjust some of your expenses or savings goals. The goal is to cultivate good financial habits that will serve you well in the long run.

how to create a monthly budget

Wrapping It Up

Taking control of your finances with an effective personal budget can be empowering. Understanding your financial resources and creating a plan to manage them wisely will benefit you significantly in the long run. The benefits that come from budgeting are hard to ignore: it can help alleviate stress, lead to better understanding of spending habits, and protect against financial uncertainty in the future. The budgeting feature from Hiatus can make your money headaches become one of the past. Having a strong financial backbone should be seen as an investment for yourself and your family. Developing a reasonable strategy for your money will improve peace-of-mind and put you at ease so you can focus on what really matters in life—a priceless commodity indeed.

Why Is Budgeting Important

A good budget can help you to keep track of your cash flow, analyze your spending patterns, and adjust your expenses as necessary. Whether you prefer to write it down or use a tool like the Hiatus app, personal budgets will help you avoid headaches down the road.

With a little bit of effort and thought, creating a personal budget can be the first step toward achieving your financial goals, whether that is saving for a vacation, paying off debt, or investing in your future. 

Some of the reasons you should start budgeting include achieving financial independence, living within your means, and having a clear understanding of where your money goes. Additionally, having a plan in place helps reduce stress related to finances by allowing you to feel confident about your income and expenses, and to make informed decisions about how you spend your money. 

importance of budgeting

Why You Need A Personal Budget

If you're looking to take control of your finances, budgeting is a must. But with so many factors to consider, it can be tough to know where to start. Here are a few compelling reasons why it’s a good idea to use a  personal budget. 

First, a personal budget gives you total control over your money. By tracking your spending, you can start identifying areas where you can make improvements. Plus, you'll finally have a clear sense of how much you're spending on all of life's essentials-- from rent to groceries to nights out with friends. 

It’s easy to lose track of your finances and spend way beyond your means without a budget. If you do decide to create one, you'll have the tools you need to save, prioritize your spending, and achieve your financial goals-- all on your own terms. The Hiatus app allows you to create custom categories so you can see exactly how you’re spending your money. 

why you need a personal budget

Types Of Budgeting Methods

While creating a budget can seem overwhelming, it’s important to look at the different budgeting methods and go with the one best for you. Here are a few budgeting methods that you can consider:

  • Zero-based budget: Zero based budgeting is simply income minus expenses equals zero. This budgeting method takes into account all of your income being budgeted before it's spent. People with set incomes or at least have a ballpark idea of their income are good candidates for using this budgeting method. 

  • Pay-yourself first (80/20) budget: The two main focuses for the pay-yourself first budget are savings and debt repayment. If you want to follow this method, you should take 20% of your income, after taxes, and put it into a savings account. The remaining 80% should be used to pay for your expenses. 

  • Envelope system budget: Similar to the zero-based budgets, the envelope system involves withdrawing all of your income in cash and separating the cash into envelopes labeled for the different categories it will be spent on. Whenever you want to buy something which would come from a certain budget, you take the money from the corresponding envelope and buy what you need.

  • 50/30/20 budget: This method breaks down your budget into three categories - essentials, savings, and everything else. 50% of your income goes to essential things like rent, groceries, transportation, etc. 20% of your income goes to your savings and 30% goes to everything else (eating out, personal purchases, whatever you like to buy).

  • 70/20/10 budget: This budget is broken down into three buckets - essential expenses, savings and investments, and debt payments and donations. 70% will go towards your essential expenses like rent, credit card payments, groceries. 20% will go to savings and investments and the last 10% goes to any extra debt payments or donations.

methods of budgeting

How To Create A Monthly Budget

When it comes to creating a budget that fits your needs, there are some things that you should consider:

Determine your Monthly Income

Knowing how much money you earn each month is essential in creating a personal budget. This includes your salary, bonuses, benefits, and any other sources of income. If you’re self-employed or a freelancer, you can estimate your monthly income based on your previous earnings. Make sure to include all sources of income, including side hustles and passive income streams. If you're making $10,000 a month or $2,000 a month, you'll be able to know how to budget your money better.

Track your Monthly Expenses

The next step is to track your monthly expenses, including food, housing, utilities, transportation, entertainment, and other miscellaneous costs. The Hiatus app is a perfect tool that will track all of your expenses in one place. You can categorize your expenses and make a list of your fixed and variable costs. Fixed costs are those that stay the same every month, while variable costs fluctuate month to month.

Set Realistic Goals

Now that you have a good understanding of your income and expenses, the next step is to set realistic savings goals. This step is crucial in creating your personal budget since it helps you determine your monthly savings target. Decide how much money you want to save each month and allocate a portion of your income towards that goal. Make sure it’s achievable and reflects your financial priorities.

Reduce Unnecessary Expenses

Reducing unnecessary expenses is one of the most effective ways to save money. Evaluate your expenses honestly and identify where you can cut back without sacrificing essential needs. You can start by eliminating subscriptions you don’t use. In this day in age, most of us subscribe to just about any streaming service. Why not switch to just one? An app like Hiatus can cancel any unwanted subscriptions for you. 

You can also switch to a more affordable grocery store, reduce dining-out expenses, and even look to get lower rates on your monthly bills to help cut costs. The Hiatus app can also see how much you spend on your monthly bills and negotiate better rates for you. Small changes can make a big difference in your budget.

Monitor and Adjust Your Budget

Monitoring and adjusting your budget is an ongoing process. Revisit your budget monthly or quarterly to see if you’re staying on track with your goals and lifestyle. If you find it hard to stick to your budget, you may need to adjust some of your expenses or savings goals. The goal is to cultivate good financial habits that will serve you well in the long run.

how to create a monthly budget

Wrapping It Up

Taking control of your finances with an effective personal budget can be empowering. Understanding your financial resources and creating a plan to manage them wisely will benefit you significantly in the long run. The benefits that come from budgeting are hard to ignore: it can help alleviate stress, lead to better understanding of spending habits, and protect against financial uncertainty in the future. The budgeting feature from Hiatus can make your money headaches become one of the past. Having a strong financial backbone should be seen as an investment for yourself and your family. Developing a reasonable strategy for your money will improve peace-of-mind and put you at ease so you can focus on what really matters in life—a priceless commodity indeed.

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Advertiser Disclosure:


Hiatus may receive compensation when you click on links associated with this Hiatus Learn Center. Hiatus is not being compensated for any application, quotation, or the purchase of any financial products.


Hiatus has partnered with MyBankTracker for our coverage of savings account products. Hiatus and MyBankTracker may receive compensation from advertisers when you click on links associated with these savings account products. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MyBankTracker does not include all companies or all savings products. 


Hiatus has partnered with CardRatings for our coverage of credit card products. Hiatus and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are Hiatus' alone, and have not been reviewed, endorsed or approved by any of these entities.


Hiatus is not an insurer or insurance producer. Savvy is the licensed insurance producer supporting the Hiatus/Savvy program. All insurance information and underwriting is provided by Savvy and its licensed insurance partners.


Hiatus has partnered with AmONE for our coverage of personal loan products. Hiatus and AmONE may receive compensation when you click on links associated with personal loan products. In certain situations, compensation may impact where products appear on the site (including the order in which they appear). AmONE does not include all loan companies or all types of loan products.


You are being referred to ADVR LLC’s website ("Advisor") by Hiatus, a solicitor of Advisor ("Solicitor"). The Solicitor that is directing you to this webpage will receive compensation from Advisor if you enter into an advisory relationship or into a paying subscription for advisory services. Compensation to the Solicitor may be up to $2,000. You will not be charged any fee or incur any additional costs for being referred to Advisor by the Solicitor. The Solicitor may promote and/or may advertise Advisor’s investment adviser services and may offer independent analysis and reviews of Advisor’s services. Advisor and the Solicitor are not under common ownership or otherwise related entities. Additional information about Advisor is contained in its Form ADV Part 2A available here.

© 2024 Hiatus, Inc. All rights reserved

© 2024 Hiatus, Inc. All rights reserved

Advertiser Disclosure:


Hiatus may receive compensation when you click on links associated with this Hiatus Learn Center. Hiatus is not being compensated for any application, quotation, or the purchase of any financial products.


Hiatus has partnered with MyBankTracker for our coverage of savings account products. Hiatus and MyBankTracker may receive compensation from advertisers when you click on links associated with these savings account products. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MyBankTracker does not include all companies or all savings products. 


Hiatus has partnered with CardRatings for our coverage of credit card products. Hiatus and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are Hiatus' alone, and have not been reviewed, endorsed or approved by any of these entities.


Hiatus is not an insurer or insurance producer. Savvy is the licensed insurance producer supporting the Hiatus/Savvy program. All insurance information and underwriting is provided by Savvy and its licensed insurance partners.


Hiatus has partnered with AmONE for our coverage of personal loan products. Hiatus and AmONE may receive compensation when you click on links associated with personal loan products. In certain situations, compensation may impact where products appear on the site (including the order in which they appear). AmONE does not include all loan companies or all types of loan products.


You are being referred to ADVR LLC’s website ("Advisor") by Hiatus, a solicitor of Advisor ("Solicitor"). The Solicitor that is directing you to this webpage will receive compensation from Advisor if you enter into an advisory relationship or into a paying subscription for advisory services. Compensation to the Solicitor may be up to $2,000. You will not be charged any fee or incur any additional costs for being referred to Advisor by the Solicitor. The Solicitor may promote and/or may advertise Advisor’s investment adviser services and may offer independent analysis and reviews of Advisor’s services. Advisor and the Solicitor are not under common ownership or otherwise related entities. Additional information about Advisor is contained in its Form ADV Part 2A available here.

App

Advertiser Disclosure:


Hiatus may receive compensation when you click on links associated with this Hiatus Learn Center. Hiatus is not being compensated for any application, quotation, or the purchase of any financial products.


Hiatus has partnered with MyBankTracker for our coverage of savings account products. Hiatus and MyBankTracker may receive compensation from advertisers when you click on links associated with these savings account products. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MyBankTracker does not include all companies or all savings products. 


Hiatus has partnered with CardRatings for our coverage of credit card products. Hiatus and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are Hiatus' alone, and have not been reviewed, endorsed or approved by any of these entities.


Hiatus is not an insurer or insurance producer. Savvy is the licensed insurance producer supporting the Hiatus/Savvy program. All insurance information and underwriting is provided by Savvy and its licensed insurance partners.


Hiatus has partnered with AmONE for our coverage of personal loan products. Hiatus and AmONE may receive compensation when you click on links associated with personal loan products. In certain situations, compensation may impact where products appear on the site (including the order in which they appear). AmONE does not include all loan companies or all types of loan products.


You are being referred to ADVR LLC’s website ("Advisor") by Hiatus, a solicitor of Advisor ("Solicitor"). The Solicitor that is directing you to this webpage will receive compensation from Advisor if you enter into an advisory relationship or into a paying subscription for advisory services. Compensation to the Solicitor may be up to $2,000. You will not be charged any fee or incur any additional costs for being referred to Advisor by the Solicitor. The Solicitor may promote and/or may advertise Advisor’s investment adviser services and may offer independent analysis and reviews of Advisor’s services. Advisor and the Solicitor are not under common ownership or otherwise related entities. Additional information about Advisor is contained in its Form ADV Part 2A available here.

© 2024 Hiatus, Inc. All rights reserved

© 2024 Hiatus, Inc. All rights reserved

Advertiser Disclosure:


Hiatus may receive compensation when you click on links associated with this Hiatus Learn Center. Hiatus is not being compensated for any application, quotation, or the purchase of any financial products.


Hiatus has partnered with MyBankTracker for our coverage of savings account products. Hiatus and MyBankTracker may receive compensation from advertisers when you click on links associated with these savings account products. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MyBankTracker does not include all companies or all savings products. 


Hiatus has partnered with CardRatings for our coverage of credit card products. Hiatus and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are Hiatus' alone, and have not been reviewed, endorsed or approved by any of these entities.


Hiatus is not an insurer or insurance producer. Savvy is the licensed insurance producer supporting the Hiatus/Savvy program. All insurance information and underwriting is provided by Savvy and its licensed insurance partners.


Hiatus has partnered with AmONE for our coverage of personal loan products. Hiatus and AmONE may receive compensation when you click on links associated with personal loan products. In certain situations, compensation may impact where products appear on the site (including the order in which they appear). AmONE does not include all loan companies or all types of loan products.


You are being referred to ADVR LLC’s website ("Advisor") by Hiatus, a solicitor of Advisor ("Solicitor"). The Solicitor that is directing you to this webpage will receive compensation from Advisor if you enter into an advisory relationship or into a paying subscription for advisory services. Compensation to the Solicitor may be up to $2,000. You will not be charged any fee or incur any additional costs for being referred to Advisor by the Solicitor. The Solicitor may promote and/or may advertise Advisor’s investment adviser services and may offer independent analysis and reviews of Advisor’s services. Advisor and the Solicitor are not under common ownership or otherwise related entities. Additional information about Advisor is contained in its Form ADV Part 2A available here.

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