How to Plan a Personal Budget

Making a personal budget allows you to plan where you want your money to go each month. When your budget is balanced, you can rest assured that you have enough money to cover everything in your budget every month. When you create a budget, you can also include long-term goals, such as saving up for a vacation, paying down debt or saving for a down payment on a car or house.

Write down everything you spend for a whole month in a notebook you may keep in your pocket or purse. Each time you spend money, write the amount and what you spent on it.

Add up your spending in each category at the end of the month. For most people, categories include groceries, eating out, alcohol, gas, entertainment, household items, personal care, charitable giving, postage, clothing and miscellaneous pocket money.

Use last month's totals as a guide to determine how much you would like to spend in each of those categories each month. If last month's spending seemed about right, use that number. If you feel like you usually spend more or less or would like to spend more or less, write that instead. Write each spending goal and category on a sheet of paper or printable budgeting worksheet.

List each of your recurring bills that are for the same amount every month on the budget paper. These usually include your rent or mortgage, cable service, phone service, garbage and sewer bills, car payment, car insurance, student loan payment, other debt payments, life insurance, renter's or homeowner's insurance, child care expenses, gym membership and health insurance if is not deducted from your paycheck.

Calculate the average amount of your bills from the last few months in categories with varying bill amounts from one month to the next. These include your gas and electric bill, water bill, credit card bill and anything else that varies from month to month. Round each average up to the nearest $5 and write this amount on your budget.

Decide how much you expect to spend per year in categories of irregular spending. These include car registration and maintenance, vacations, gifts, health care, subscriptions and home and yard maintenance. Divide each category's total by 12 and record the amount on your monthly budget paper.

Write down any amounts you would like to save toward long-term goals. For example, you might want to save $200 each month toward a down payment on a home or make an extra credit card payment of $100 per month.

Add up the total projected monthly spending listed on your budgeting paper.

Calculate your total monthly income by adding up the amounts of all paychecks received during an average month. If you get paid every other week, base your monthly income on two paychecks per month. Because a month is slightly longer than two pay periods, you will get a third paycheck at the very end of two months each year. Because you don't needwill this money as income in your budget, you can put it into savings, pay off debt or use it for something else.

Compare your monthly income to your monthly expenses. If the income is more than the expenses, you have a working budget. You can increase the amount you budget to spend in some categories as long as your income remains greater than or equal to your expenses.

Reduce the amount you spend on your expenses if your income is less than your expenses. Some easy areas to cut include entertainment, alcohol, eating out and clothing. Continue reducing your expenses until your income is greater than or equal to your expenses.


  • Track your spending each month in flexible categories to ensure that you are sticking to your budget. You could even put budgeted money for each category into an envelope at the beginning of the month so you can only spend what is in the envelope.