Creating a Personal Home Budget

By Scott Carlino
The importance for creating a home budget home is crucial in order to make certain that an individual is not living above their means and that the individual is not accumulating unnecessary debt. The purpose and real importance of creating a home budget for most people is to make sure that the money going out does not exceed the income. A home budget is meant to keep a good grasp on the flow of income and allocating this money correctly as an individual works towards retirement. Budgeting is all about how well people can manage their money and identifying opportunities to save it. Budgeting helps keep track of where the money went. Without a budget, many Americans over spend accumulating more debt without understanding why they live pay check to pay check.
A good solid budget summarizes how you spend your income and will help create a personalized map for spending. I created this budgeting plan as simple as possible and followed the specs of the assignment. I used my past experience when my income was under $40,000 dollars per year net.
First I used the Microsoft office excel tool which was able to present a personal home budget, using a realistic scenario in relation to what a single male would spend his money on. The spreadsheet was already broken up into different sections: a summary section, income, expenses, finance payments, fixed expenses, and variable expenses. The excel program also created columns for each section dedicated to expenditures which were actual, budgeted and automatically calculated whether the section was above or below targeted budgets. I was impressed with the Microsoft office excel program because it was user friendly and lent itself to an average user who possessed limited computer skills.
Using the excel program I was able to established the major category percentages and see the actual breakdowns for this home budget. The percentage breakdowns were as following: The finance payments were shown to be close to (35%), the fixed expenses were shown to be close to (14%), and a person with a $40,000 dollar net income showed their variable expenses to fall close to (46%). Fixed expenses were the home mortgage, student loan, insurance, utilities and car loan.
A professional financial advisor could make the argument that the spending on eating out and vacations should be reduced but people need to live life. I can probably say that this budget could safely take off 10 % of the spending for entertainment factors and put the money away for more retirement. I feel that it really comes down to controlling a person’s wants and needs. Individuals need to sit down and think about what he or she wants out of life. When a person begins to create a personal or home budget it is important for that individual to understand the core concept of what the budget is meant to do. The objective is to enable and forecast the management of personal income and expenses while planning for future spending and direction of money flow. A personal budget will help you control your finances – understand where your money is going, pinpoint the areas of excessive expenditure and cut down unnecessary expenses. In the budget I created most of the excessive spending falls into the entertainment, dining out and vacation categories.
The question in life that always arises is this: Should a person with limited income and budget in order to live for today or live towards retirement? In my life I always had the attitude that I could possibly get hit by a bus or car tomorrow so, why not spend the extra money and have fun. I explain this as the “You only live once scenario”. Only 1% of individuals in the world emerge from their position in society which they were born into. So, why fight the system? I believe a careful plan for the future is very important but I also believe that a person should not deny themselves some pleasure and happiness while living in the present. Worrying about the future is warranted but too much worry has a negative effect on an individual’s life.
It is apparent in today’s society that Americans work harder and harder week after week spending more and more money increasing their debt year after year until this debt becomes unmanageable. They count on their next pay raise without the understanding that inflation alone will be more than the raise received. Everyone need money to survive and is the main driving factor for most. Having an understanding that money does not grow on trees will help people to stop purchasing products they do not need.
In closing I will say that I think people should research and understand their economical position and live the best they can while planning a reasonable budget keeping in mind retirement. The question of what is reasonable will have to be left up to the people planning the budgets for themselves. I lived my life day to day because I understood that I had to enjoy my life now. Having a good understanding about rising inflation, interest and purchasing is very important for creating a realistic budget. Unfortunately, that is not going to work out that way for most people in the times that we live in.

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