If you're looking to get a handle on your spending and start saving for your future, then creating a personal budget is a great place to start.
A personal budget is simply a plan for allocating your income to cover your expenses and reach your financial goals.
Whether you're a finance pro or looking to create a personal budget planner for the first time, you may consider some of the below pointers to help build your budget and manage your money.
A personal budget is a financial plan that helps you manage your income and expenses. Think of it as a tool that helps you track how much money you’re earning and spending every month. With a budget, you can:
It can also help paint a better picture of your current financial situation and potentially get you closer to reaching different money milestones, from short-term targets like saving for a vacation to long-term goals like saving for retirement.
Here are a few steps you might consider to get started:
Keeping track of your spending and making adjustments where necessary, can help you save money and work toward your goals.
When it comes to building a personal budget planner, there are several types available, including:
Ultimately, the type of budget planner you use will depend on your personal preferences and the features that are important to you. Consider trying out a few different options to see what works best for you.
Wondering what the 50/30/20 rule in budgeting is?
No matter the personal budget planner you choose, the popular 50/30/20 rule is a simple, easy-to-follow budgeting guideline that suggests spending on necessities and saving while still allowing some room for fun and discretionary spending.
With this rule, approximately 50% of your income would go toward necessities, such as housing, food, transportation, and healthcare. In other words, expenses that you cannot live without.
The next 30% is for the fun stuff! This can include spending that involves going out with friends, treating yourself with a trip to the mall, or indulging in your favorite hobbies.
And finally, think of the last 20% as spending for your future. This is where you can put money into savings, a retirement account, or an investment portfolio. It’s also a good opportunity to create a targeted plan to pay off outstanding debts like student loans or credit card balances.
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It's a good idea to check in on your personal budget regularly to ensure you're on track and making progress toward your financial goals.
Reviewing your budget once a month can help you catch any discrepancies or overspending early on, while checking in quarterly (every three months) can give you a longer-term perspective and help you identify any trends or patterns in your spending. Once a year, you may want to review your budget to set new financial goals and assess your progress over the past year.
To that end, the frequency with which you check in on your budget will depend on your personal preferences and financial goals. Some people may find it helpful to review their budget more often, while others may prefer to check in less. The key is to find a frequency that you can commit to.
When building a personal budget planner, there are several other factors to consider beyond just your income and expenses in the 50/30/20 method. For instance, you may want to incorporate other categories for major goals like paying off your mortgage or reducing your taxable income.
In any case, any personal money management solution should reflect your values and priorities. Consider what is most important to you and allocate your resources from there.
And don’t forget your financial situation may change over time, so build in a cushion for unexpected expenses and be open to adjusting your budget as needed.
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