Tips for Creating a Realistic Personal Working Budget

Making a personal budget may be something you’ve been putting off for a while but it’s an important asset to have when you’re responsible for managing your finances. Setting up a realistic personal budget does take some time and you need to be very honest about your spending habits, monthly expenses and your income. A working budget for your personal finances can help you better understand your financial situation and help you set aside the funds you need for emergency expenses and other expenditures. A solid budget can also make it easier to save for something that is really important to you.

Use some of these tips and ideas to create a realistic personal working budget:

1. Put together a folder with all of your statements. Create a single file that includes bank statements, credit card statements, insurance documents and your latest utility bill(s). These items will help you visualize how many accounts you have open at any given time and where your money is going.

2. Create a spreadsheet. One of the easiest ways to create a personal working budget is to use a spreadsheet program. You will need to create a spreadsheet that lists all sources of income and your monthly expenses in separate columns. Make sure these columns are as thorough as possible so that your personal working budget is as realistic as possible.

3. Itemize all of your monthly fixed expenses in detail. Make sure you are including all types of monthly expenses in your expense column. This column needs to include your mortgage or rent, health and car insurance, home insurance, child care costs, student loans, car loans, licenses or certification fees, investments and education costs. Be as detailed as possible when creating this list so that you have an accurate view of how much money you are spending each month.

4. Itemize your variable expenses using an average. Variable expenses include groceries, utilities, car maintenance expenses, Internet service (in some cases) and, gas for the car, and parking fees or tolls. Create a second column next to your fixed expenses list so that you have an accurate view of how much you spend, on average, on these types of expenditures.

5. Create a list of extra or luxury expenses. Anything that doesn’t fall into the fixed and variable expenses falls under the “luxury” expenses category. This includes clothing, movies, entertainment, dining out, personal care services, gym memberships and computer software purchases. Make a list of things that you typically buy over the course of a month.

6. Deduct your total expenses from your income. Add up all of your expenses from each column and deduct the total from your total income. The difference will be the amount you have available for your savings account or other luxury purchases. Knowing what this figure is can help you create a realistic spending budget and may prompt you to scale back some of your other expenses. You can tweak your budget according to your personal financial goals and review it at least every other month to keep yourself on track.