How to make a personal budget in 6 simple steps [TEMPLATE]

A personal budget is a plan that outlines how much money an individual earns and how they're spending, saving, or allocating it to meet financial goals. To make a personal budget, start by listing income and expenses, set realistic goals, and choose a budgeting method that aligns with financial priorities and lifestyle.

Learning how to create a personal budget is a practical first step toward financial stability. Whether someone is a finance pro or looking to become a consistent budgeter, knowing how to manage money, set priorities, and work toward short- and long-term goals is important for success.

Follow these tips and practical steps for building personal budgets and working toward financial independence.

Table of contents

• Personal budget template
• 1. Determine income
• 2. Note expenses
• 3. Track spending
• 4. Set goals
• 5. Find a budgeting method
• 6. Review and adjust
• Budgeting tips for success
• Stay on top of money management with PayPal
• Frequently asked questions

Personal budget template

With a downloadable personal budget template or financial planning worksheet, expense tracking can become simple and intuitive. A helpful template should include:

• An overview tab
• Income, fixed expenses, and variable expenses
• Automatic calculations
• Customizable categories

Use a customizable personal budget template to track expenses, savings, and other uses for funds.

1. Determine income

The first step in budgeting is to calculate total monthly income from all sources, including:

• Take-home pay, like wages or salary after taxes
• Variable income from freelance work, tips, and commissions
• Additional earnings from doing side hustles and making money from home, rental income, and dividends

For those with irregular income, an average based on the past three to six months may provide a more accurate baseline.

2. Note fixed and variable expenses

After calculating income, the next step is to list all monthly expenses, including debt. People often group these into two categories:

• Fixed expenses: Costs that stay the same each month, like rent or mortgage payments, insurance premiums, and subscriptions
• Variable expenses: Costs that fluctuate, including groceries, fuel, dining out, entertainment, and more

Organizing and tracking expenses by categories, like housing, food, healthcare, and leisure, can help identify trends and make planning easier.

3. Track spending

Before finalizing a budget, track spending for one or two months to get a more accurate idea of cash flow. Budgeting apps, spreadsheets, or manual notes can all be helpful when tracking earnings and expenses.

This helps provide a clear picture of actual financial habits and highlights areas where the individual can adjust spending.

4. Set goals

Defining financial goals is helpful in giving a budget direction and purpose. These can be:

• Short-term goals that are achievable in less than a year
• Long-term goals that may require longer than a year to achieve

Each goal—like saving a certain amount for a sinking fund or vacation—should include a dollar amount and target timeline.

5. Find a budgeting method

As there’s no one-size-fits-all approach to budgeting, different methods suit different financial situations and personalities. Consider a budgeting method like:

• 50/30/20 budget: This method is great for those seeking balance. It allots 50% of income to necessities, 30% to wants, and 20% to spending for the future.
• 60/30/10 budget: Those interested in savings and long-term planning may want to allocate 60% of income to needs, 30% to savings, and 10% to wants.
• Zero-based budget: In this accountability budgeting method, every dollar has a specific purpose, so the budget equals zero.
• Cash stuffing/envelope system: To manage money and discretionary spending, the cash stuffing method uses physical cash to allocate funds to spending categories.
• Pay-yourself-first budget: This budgeting method prioritizes saving before spending and is best for those planning for the future.

Depending on the method, individuals may need a budgeting calendar that syncs income and due dates for extra structure.

6. Review and adjust

Budgets are not meant to be static and should adjust as life changes. Periodic reviews, like monthly, quarterly, or annual reviews, or biweekly budgeting, can help ensure the plan stays aligned with current needs and goals.

The frequency of budget checks will depend on personal preference, but setting reminders or using automatic savings transfers can help individuals stay on track with their financial goals.

Budgeting tips for success

When building a personal budget, there are several factors to consider beyond income and expenses. Consider these tips for creating a unique budget:

• Build in a cushion for unexpected expenses
• Determine family budgeting needs
• Customize categories to match savings goals
• Use separate accounts for spending, bills, and savings
• Track progress regularly to stay motivated and informed
• Prioritize fund transfers based on values and long-term goals
• Make room for flexibility as financial situations evolve