Creating a budget is essential in order to balance your personal finances and save money. This will lead you to financial security and remove worries of "What if?" In Part 1, I explained how to budget your needs, the things you absolutely have to have, and how to save money on this area. In this article, I will explain how to balance your fun money, the second category of your budget, as well as offer suggestions of ways to save money on this area of your finances.

Fun money is obviously spending on what you want to have and doing the things you want to do. This includes things like cable t.v., magazines and vacations. You need to find out how much of your income you are using for fun money. This means writing down everything you spend in this category. Don't omit anything. Write down your sodas, snacks from vending machines, no matter how small the expense is, it needs to be included because small amounts can really add up. To determine the percentage of your personal finances that you are spending on your fun money, take the amount you are spending here divided by your total income. For example, if you make $2,500 a month, and you spend $1,000 on your fun money each month, take $1,000 divided by $2,500. This equals 0.4 or 40%.

Experts disagree on the exact percentage of your income that should go toward your fun money, ranging from 10%-30%. If you are using more than 30% of your personal finances on fun money, as in this example, or have a lot of debt, you need to decrease the amount you are spending on this category. However, the percentages that you divide your budget into should suit you. Maybe you want to decrease the amount you are spending on fun money and increase the amount you are saving. Or maybe your goal is to spend 50% of your income on needs and 25% on fun money. The point of creating a budget and balancing your money is to take control of your finances, and bring you peace, not stress. Look at your personal finances and decide how much money you want to spend on each category to achieve what you want in life. Then, make whatever changes necessary to bring your money into that balance, and stick to it.

In order to make changes on the amount you are spending on your fun money, you need to find ways to save money on this category. Eat out less often and bring your lunch to work. Make your own coffee instead of buying it. Shop for a new cell phone plan. Change to basic cable and cancel your premium channels. Start jogging outside and cancel your gym membership. Rent movies instead of going to see them at the theater. Instead of paying a baby-sitter to watch your kids, offer to watch your friends' kids for an evening in exchange for them watching yours. You get the idea. Get creative and look for a variety of ways to save money.

The next category of your budget is for retirement and debt repayment. Depending on the percentages you have given to your needs as discussed in Part 1 and your fun money, you have anywhere from 60-90% of your money spent, leaving you with 10-40% for retirement and debt repayment. However, I'm not going to discuss them here. Look for my previous articles that focus on each subject individually, or just click on the link below to visit my blog for more information about each topic.

Gina Clark writes on financial issues. Click here to learn additional ways to save money and manage your personal finances.