In this article I will try to give ideas on how you can create a personal budget plan. The intent is that you will be able to create a personal budget plan that outlines the amount available after calculating income and expenses.

5 Steps on How to Create a Personal Budget

  1. First step is to start by breaking down your expenses into groups: utilities, food, transport, insurance, entertainment.
  2. Second, add the amounts related to each expense that you have noted.
  3. Third, list your income sources. Usually salary is the only source of income.
  4. Fourth, sum up the amounts in the income and expense columns.
  5. Fifth, deduct expense total from your income total. This will give you the amount available after expenses have been paid.

Items to Include in Your Personal Budget

It is entirely up to you to decide which items should be listed in the personal budget. Below are recommendations on items to include and how to group them so that you can easily identify where your money is being allocated.

If you are not sure about how much you spent, try opening the account statement from your bank and any credit card statements you receive.

  • Income
    • Salary, dividends, capital gain.
    • It is important to specify the income net of tax. Using income amount before tax will give the wrong impression as it overstates the amount available to pay expenses.
  • Housing
    • Rent or mortgage
  • Debt
    • Credit card payments, other debt.
  • Utilities
    • This includes water, electricity, heating, Internet
  • Food
    • Eating at home or dining out.
  • Transportation
    • Car, bus, train etc.
  • Entertainment
    • Streaming services, TV, sports
  • Insurance
    • Any insurance plans you may have

Personal Budget Plan Example

Below example can be used to cover any period that works best for you, being either weekly, monthly, or a full year. The important thing is that it provides an quick and easy overview of your personal finances.


Creating an Emergency Reserve Fund

Putting money aside for a rainy down is a great idea to place savings in case you do not already have something like this. Generally speaking, it is recommended to have somewhere between 3-6 months, but this may vary depending on your lifestyle. The higher uncertainty the higher the amount you typically want to put aside.

For ideas on how to save towards an emergency reserve fund or other savings e.g. pensions, I recommend reading you ready my article on the 10% rule.

Saving Tips

You can reduce your expenses in a number of ways. Below articles highlight options that can help you save more money:

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