How to Create a Personal Budget
Managing your finances is an easy task if you have a personal budget. Creating a personal budget you can stick with can save money, help you plan for large purchases and prepare you for life after work. Maintaining accurate records for your income and spending also is beneficial for filing annual tax returns and assessing your net worth.
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Instructions
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Obtain records and information about your income. Note your gross wages and your take-home pay. Your take-home pay is the amount of your paycheck after your employer deducts federal, state and local income tax, taxes for Social Security and deductions for your contribution for group health insurance and retirement savings. Double-check your pay stub and income records to ensure your insurance premiums and retirement savings are being deducted from your pretax income.
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List your housing expenses, starting with your monthly mortgage amount or rental payment. For mortgage payments, look at your records to note how much of your monthly payment is allocated to taxes, interest and insurance. When you file your tax returns, you may be able to deduct the amount paid for taxes and interest. If you rent your home, include the amount you spend for renters' insurance in your housing expenses.
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Add up your savings amounts. Include savings deducted from your paycheck as well as regular deposits into your bank savings account and periodic contributions to investment accounts.
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Gather data from utility companies, such as bills for electricity, gas, water and sewage, trash collection, home telephone, and cable television. If you have an alarm system for which you pay a monthly monitoring fee, include that as well. This section of your budget is for household expenses. Consider additional costs such as homeowners association dues, too.
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Calculate how much you spend on groceries, household cleaning supplies, lawn care, paper products, laundry and related costs to run your household. If you hire services like domestic help, tree trimming or other handy work, include those expenses.
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Log your average monthly expenses for entertainment. Entertainment expenses include restaurant meals, movies, social activities, travel and related costs. To arrive at an accurate figure, you may have to jot down the money you spend during every outing. Keep a small notepad in your pocket or purse to make it easier to write down what you spend or keep your receipts handy, and you won't have to rely on memory to reconstruct your expenses.
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Estimate your costs to go to work. Include gasoline, toll and parking fees, dry cleaning expenses and lunches. For ease of reference, you may want to keep your cost of meals during the workday separate from the money you spend on food for entertainment expenses. List additional work expenses, such as uniforms and shoes, even if your employer provides a reimbursement.
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Examine your personal care expenses. This section of your personal budget includes salon treatments, spa or gym membership, clothing, and club dues. Monitor your spending on clothing in the same manner you would for entertainment. Or, review your credit and debit card purchases to calculate an average for each month.
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Calculate how much you donate to charitable organizations, such as church or temple, community service associations, and nonprofit foundations. Some of these donations may be tax-deductible, so it's important to keep accurate records.
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Create a spreadsheet for your income and expenses. Type the months along the horizontal axis. On the vertical axis, list the categories of expenses, with individual line items. For example, list "Utilities" and under that heading list telephone, cable, electricity and other services in the category.
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Review your personal budget periodically. In the beginning, you may want to review it monthly to ensure your estimates are accurate. Always update your personal budget whenever you receive a raise or modify your spending habits.
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