How to Create a Personal Budget

Personal Budget 101

Household budgeting has become popular again because of the current recession and consumers are bombarded with buzz words from fraudsters looking to scam an easy buck. We have all heard the terms - debt consolidation, debt counselling, credit counselling, Debt freedom; the list can go on and on. There are tons of services being offered to help straiten consumers out and save them from their in abilities to save. Some of these services could be useful; however, the overwhelming majority are a bunch of BS. The solution is so simple ‘live within your means’.

I will provide the process I go through to budge via an excel spreadsheet screen shot showing the formulas I use to produce my budget and this discuss the process briefly.

Here is a sample personal budget:

Things to include in your budget: Revenue, Expenses, Amount you want to Save, Discretionary spending.

Revenue: I only include employment income after deductions. You use the net income of you pay because you won’t have the extra income to use throughout the year, even if you are expecting a tax refund. Also, I do not include investment income because that is all for retirement and not a part of my day to day spending allowance.

Expenses: There are many different expenses to include. I just include all the expenses that I know I will have to pay over the month. The largest of those is usually rent followed by food, etc. You should also budget for food here and gas you will likely use in your car. If you spend less than you budget or more than readjust the budget afterwards.

Savings: realistically you should be saving something. Even if you are only saving for a vacation or a new sofa you need to be living within your means.

Discretionary: This is the amount that you can blow on a given day for items that are not part of your normal expenses, for example, movies, concerts, the bar, etc. Once you have figured out your excess income over and above your expenses and savings this is the money that you get to have fun with. If you don’t have any discretionary income then you must do one or both of two things – make more money or spend less. Obviously the easiest is to cut down on your spending and then focus on increasing your income.

If you have problems with excel here is a screen shot of my budget with formulas included:

Just remember the key is to live within your means.  2vetny8hg5