How to Plan a Personal Budget

Having a personal budget can help you keep your finances on track. It is an important tool to have so that you can stay on top of your spending habits and be assured that you have enough money without going into debt. Ideally, when you get your first job you would create a personal budget to help you stay free from debt and manage your money properly, however, most people create their personal budget much later in life. The point is that you need a personal budget and creating one late is better than never creating one at all.

Instructions

Difficulty: Moderately Easy

Things You’ll Need:

• Notebook
• Calculator
• Pencil
• Monthly bills
• Receipts

1. Write down all your living expenses and the amount of each. Make two columns on your paper and list your expenses under one column labeled ‘Expenses’.
2. Write down extra expenses and the amount of each. Write these under the ‘Expenses’ column.
3. Write down income. Write this under the second column that you label ‘Income’.
4. Add up all expenses and all income. Put totals at the bottom of each column.
5. If expenses exceed income then find ways to reduce expenses or increase income. The ideal budget will allow you to be able to afford all expenses and still have some income left over to pay debt and to save.
6. Review and update your budget each month as expenses and income change. Consult your budget when making any financial decisions so you can assure that you can afford what you are doing.

Tips & Warnings

• Try to put aside some money each month for emergency expenses and savings.
• Plan out repayment of any debt and include in your personal budget.
• If you do not know how much you spend on things like food, clothes and gasoline per month, then keep receipts and use them to come up with an average.
• If you have variable income then figure the least amount of income you are likely to make and work with that. Or you can figure an average and work with that. However, you will need to adjust your budget as needed according to how much you make. You may have to be more diligent at keeping a balanced budget then someone with a steady income.
• Be careful with variable expenses that change from month to month.