<|im_start|>system
You are a highly capable and versatile AI assistant, ready to follow instructions precisely, engage in natural multi-turn conversations, and provide creative and helpful responses. Adapt your tone and style as appropriate for the user's query.<|im_end|>
<|im_start|>user
What are 6 things to consider when building a personal budget? Please list them out, and provide a detailed explanation of each. <|im_end|>
<|im_start|>assistant
Sure thing! To create your personal budget, follow these six steps. 

1. Calculate your net income. 
Start by creating your net income. Net income is the money you earn after all taxes and fees have been accounted for; it is the money that figuratively ends up in your pocket at the end of each month. This is important as the foundation of your budget. It determines how much you have available to allocate to your expense categories. A common mistake people make when calculating income is to use the gross total before taxes and pension contributions. This means they anticipate more income than they actually receive and thus leads to an inaccurate budget. To find your net income, you can look closely at some historic payslips or use one of the many online calculators. 

2. Track your spending.
The next step is to track and categorize your spending habits for 1-3 months. I would advise three months to ensure any quarterly payments are included; however, one month is enough to get a sense of spending habits in most areas. This is important as it will give you an idea of where your money goes each month and give you a solid base to create a monthly budget. To do this, you can write down each transaction you make throughout a period and assign it a category. Use an Excel spreadsheet to make things easier for you. Most banks will allow you to download a CSV file that includes all your transactions for a pre-determined period. Once downloaded, you can write a category next to each transaction. 

3. Set attainable goals.
The next thing you need to account for is the goals you have. Ensure that your goals are attainable and set a period for them also. Common goals are to pay down debt you have previously accrued or establish savings such as a three-month emergency fund. These goals should primarily be short-term and achievable within 1 to 3 years. It is ok to establish longer-term goals, but for your monthly budget, the short-term is what we are most interested in. Make sure these are motivating goals, as these will help to keep you on track when you want to disregard your budget. 

4. Make your plan. 
This is where you start to formulate a budget. You have your recorded transactions and your income. Look at your recorded expenses and determine for each category what a good budget would be for each month. For some of your fixed costs, this will be obvious. Your rent, for example, will not vary month on month. Your variable costs, such as eating out, may vary monthly, so set a middle ground you are comfortable with. You will need to make separate categories that consider your goals, for instance, a vacation category where you aim to save $100 monthly. All your budgeted expenses totaled should fall within your net income number. If it doesn't, you will have to cut back somewhere. 

5. Stick to your budget. 
Take great care to stick within your budget. Your budget guarantees reaching those goals and living within your means. Continue to track your spending to ensure you are remaining within budget. If you see certain categories are almost fully spent and it is only the 9th of the month, this should help you to stop spending in that category. If you overspend in one category, consider reducing spending in another to stay on track. Use your goals as motivation to stick with it.

6. Review regularly. 
A budget is only as good as when you do it, so maintain and update it as necessary. A pay raise at work will mean your budget can be adjusted to show more income and more capacity to save or spend. It's always good to review your budget at least quarterly, but the best budgets are updated monthly to account for the variables of life, such as birthdays, events, and other one-off occasions. It's unlikely that your December (Christmas) budget is the same as your budget for February. Use a forward-thinking approach to maintain and update your budget. There is no harm in reducing your budget in one month, so you can increase it in another so long as combined, they are within your income. <|im_end|>
