How to Write a Personal Budget

A personal budget is merely a short-term financial plan, where you designate what happens to your money in any given month. Experts in goal setting will say that the single most effective step to achieving any given goal is to write it down. Therefore, a budget is simply how one writes down the financial goals for the current month.

At the top of the page write down the amounts of all paychecks and other income for the upcoming month. Only the take-home (after-tax) pay is important, since that's all you have to work with. (The techniques for dealing with variable income are dealt with in other articles.)
Sum up all the paychecks and other income. That is the total amount you have to work with.
Write down your projected monthly expenses by category with one category per line. The first column should be the expense category. The second column should be the amount given to that category. And the third column should be how much money you have remaining. It is advantageous to put higher priority categories closer to the top.
Continue to allocate the money until there is no money left. If you find that there is not enough money, you will have to reduce spending in some categories. If you find that there is extra money, then you should plan to do something with it - otherwise it will probably be spent unwisely and disappear. Consider putting it in savings, using it to pay down the mortgage, etc.

Here is a simplified sample budget following this pattern.
Paycheck 1: $1500
Paycheck 2: $1500

Total pay: $3000

Giving - $300 - $2700
Food - $350 - $2350
Mortgage - $700 - $1650
Electricity - $80 - $1570
Water - $40 - $1530
Gasoline - $150 - $1380
Clothing - $60 - $1320
Internet and cable - $70 - $1250
Telephones - $50 - $1200
Automobile insurance - $100 - $1100
Roth IRA contribution - $300 - $800
Life insurance - $30 - $770
Entertainment - $40 - $730
Car repairs - $100 - $630
Saving for next summer vacation - $100 - $530
Saving for upcoming Christmas - $70 - $460
New gas grill - $200 - $260
Ted's birthday present - $20 - $240
New hard drive and graphics card - $240 - $0



Copyright 2009 by Michael Nehring