Creating Personal Budget Goals

Chapter 1: How to Make a Budget and Stick to It
Chapter 2: Creating Personal Budget Goals
Chapter 3: Assessing Your Current Financial Situation
Chapter 4: Identifying Budget Focus Areas
Chapter 5: Staying Committed to Your Budget
Chapter 6: Budget Software

Before you begin making your budget, understand the primary goals your budget should fulfill. This helps create a focused and effective financial plan. A step by step approach to budgeting helps in understanding the goals of your budget.

The first step in making a budget is to analyze your own specific reasons for it. Do you want to become debt free, save for a retirement fund or create a college fund? Or you have no specific goals as yet, but simply want to streamline your finances and cut out unnecessary expenses?

If you have specific goals, the exact target for the budget will also be very specific. For example, if you want to buy a $300,000 home in 5 years time, you can make a budget that will help you save up towards this goal.

Those who have no specific goals but want to save for a financially secure future should try to predict future needs and determine quantifiable goals first. This sets up clear targets to aim at through the budget. Remember that even though you may have no specific goals now, they will arise sooner or later as the years go by.

For example, when your family grows you will need to start considering a bigger home. As children grow, their future education expenses come into the picture. As you grow older, a medical fund or retirement fund begins to take priority and so on.

An effective budget helps prioritize expenses, starting today, so that your current and future earnings really go towards getting you the things that matter to you.

The Primary Goal of Every Budget

The primary goal of a budget is not to cut spending but to spend effectively and make every dollar spent count. In general, budgeting has three main facets that together help fulfill this primary goal:

  • It identifies unnecessary expense areas
  • It identifies where and how much can be saved
  • It identifies and sets achievable periodic milestones or targets

Your budget is a tool for a planned, systematic effective spending regimen. By structuring your expenditure and highlighting weak spots through budgeting, you can plug loopholes where non productive expenditure occurs. These savings can then be diverted towards necessary future spending.

Next: Assessing Your Current Financial Situation