How to Make a Personal Budget in 6 Easy Steps

Money is one of the most common topics among friends. Whether it’s about how much they make, what their debt looks like or where their next paycheck will be coming from, everyone seems to have an opinion on how others should manage their finances. The truth is that money management isn’t easy for anyone – but with a few simple steps you can get your life back in order!
This blog post will take you through six easy steps to create a personal budget so you can start living within your means and save more money than ever before. You’ll be able to track all of your income and expenses so there are no surprises at the end of the month! If this sounds like something you want to do then keep reading!


You’ll need a budget if you want to keep track of your spending and achieve your financial objectives.

A personal or household budget is a summary that analyzes and monitors your income and expenses over a certain period of time, usually one month.1 While the term “budget” is generally linked with spending restrictions, a budget does not have to be restrictive to be effective. In this blog, I’ll be sharing my 6 easy steps in creating my personal budget.


STEP 1: Determine your monthly income

I’ve always thought that I was terrible with money. You know, the type of person who would go to the grocery store without a list and then return home with nothing but $500 worth of fruits and veggies.  When my mom used to ask me why I bought so many ingredients, I’d just shrug my shoulders because it seemed like a pretty reasonable purchase at the time. It wasn’t until recently that I realized how bad my habit had gotten – one day this past summer, as I was going through all of my purchases from June and July, I found that over half were impulse buys made on credit cards! Not only did these random splurges make me feel guilty for spending frivolously (and not learning anything). I later realized that the REASON why I do impulse buying is because I do not know how much my monthly income is.


STEP 2: Write down all of the expenses you’ll have in a month

Write down a list of all the expenses you expect to have during a month. This list could include:

  • Mortgage payments or rent
  • Car payments
  • Insurance
  • Groceries
  • Utilities
  • Entertainment
  • Personal care
  • Eating out
  • Childcare
  • Transportation costs
  • Travel
  • Student loans
  • Savings

Use your bank statements, receipts, and credit card statements from the last three months to identify all your spending.

Karin’s Tip: Compare your budget to what you actually spend in a month to determine if it needs adjusting


STEP 3: Track your spending

Keeping track of and categorizing your expenditures will help you figure out where you can save money. This can help you figure out where you spend the most money and where you can save the most money.

To begin, make a list of all of your fixed costs. These are monthly bills such as rent or mortgage payments, utility bills, or automobile payments. Although it’s doubtful that you’ll be able to eliminate these, knowing how much of your monthly money they consume can be useful.

Next, make a note of all your variable costs, such as food, petrol, and entertainment, which might fluctuate from month to month. This is an area where you might be able to save money. Credit card and bank statements are fantastic places to start since they itemize and classify your monthly expenses.


STEP 4: Set your goals

Make a list of all the financial goals you want to achieve in the short and long term before you start sorting through the data you’ve collected. Short-term goals should be completed in less than a year. Long-term goals, such as retirement savings or your child’s education, might take years to achieve. Remember that your objectives don’t have to be carved in stone, but determining your priorities before beginning to build a budget will assist you. For example, if you know your short-term aim is to pay off credit card debt, it may be simpler to curb spending.


STEP 5: Make a plan

Use the list of variable and fixed costs to estimate how much you’ll spend in the following months. You can estimate how much money you’ll need to budget based on your fixed costs. When attempting to forecast your variable expenditures, use your previous spending habits as a reference.

You might further divide your costs into necessities and desires. If you drive to work every day, for example, fuel is almost certainly a must. A monthly music subscription, on the other hand, can be considered a wish. When it comes to making modifications, this distinction is critical.


STEP 6: Be Consistent

The best way to start is by tracking your spending for one month and BE CONSISTENT. To be honest, this is the hardest part of the process – I remembered being consistent for 2 Quarters then by Quarter 3 – I failed. If you fail, pick up the last entry (do not try to remember your spending as this would stress you out) As time goes by, you would be surprised that logging your expense becomes a habit and you’ll see how much you spend on things that are not necessary, and this will help you make better decisions in the future!


Creating your personal budget is the first step towards a better financial future. It doesn’t matter how you get there, as long as you take this initial step and stay motivated to continue on your journey! We hope these six steps have been helpful for you and we wish you all the best in achieving your goals with money management. You can do it!

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Karin Adoni
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