Creating a Personal Budget

For some the word “budget” is a dirty word that evokes negative feelings. Those who understand budgeting know that it is a word that can equal financial freedom. So, if you don’t already have a personal budget, here is what you need to do.

Figure out what your entire monthly income is. Include paychecks, bonus, tips, and any interest you may make. From this figure out what your yearly income is. Now you know what you have to work with. Creating a budget is much more enjoyable if you have a goal in mind. Maybe you want to save money for a down payment on a house, or a family vacation, or maybe it is just to eliminate some debt. So, create a goal and think of it as you work through your budget.

Now you need to make a list of all of your fixed expenses, anything that gets paid monthly. These are things like rent/mortgage, car payment, church/charity contributions, medical insurance, dental insurance, garbage, gas, electricity, natural gas, phone, water, etc.

Make a list of all your occasional expenses. Occasional expenses are the things that come less frequently than monthly but are paid on a regular basis. Examples are: car insurance, car registration, home insurance, life insurance, magazines, property taxes, vehicle inspections, etc. Don’t forget to include money for b-day presents, vacations, and Christmas. Then there are those wonderful variable expenses: Car maintenance/repair, dry cleaning, Home repairs, school fees, pictures, prescriptions, stamps, tires, yard supplies, etc.

Once you have all of these things listed, create a practice budget. Write down how much you propose to spend on each item. At the end of the month record how much you actually spent and compare the two. Did you spend more or less in certain areas? Was it feasible? Adjust your budget accordingly and now you are ready to start saving for your goal.

You can view a budget worksheet here. You can also download budget templates of all kinds from here.