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How to Make a Personal Budget

Anybody can create a budget. Making one you can live with is the challenge.


  • Step 1: Track expenses For one month, write down every single cash purchase that you make.
  • Step 2: Review finances With the help of your spending journal and your credit card and/or debit card statements, tally up how much you spent the past month. Then subtract it from your monthly net income.
  • Step 3: List debts List any debts you have.
  • TIP: You can find personal finance software online that will help you create a budget.
  • Step 4: Analyze spending If you are spending more than you earn, see where you can cut back. Keep trimming until you’ve figured out an amount you can afford to spend each month on nonessential items like new clothes and dinners out.
  • TIP: Don’t forget to include a payment to yourself—as savings. Even if it’s just a nominal amount, it will get you in the habit of saving money.
  • Step 5: Include seasonal expenses Tally up as many annual expenses as you can (holidays gifts, a summer vacation, birthday presents); divide by 12 and add them under 'Miscellaneous.'
  • TIP: If you have credit card debt, factor in the greatest monthly payment you can afford that is above the minimum so you can begin chipping away at your debt.
  • Step 6: Make adjustments Review your budget every month and adjust it if necessary, even if that means allocating more to expenses and less to savings and/or debt than you’d hoped. You need to keep it realistic, or it won’t work.
  • TIP: If the holidays kill you every year, consider starting a Christmas club account—that’s where a certain portion of your paycheck goes directly into a special bank account.
  • Step 7: Be realistic Be realistic about sticking to your budget. Like a diet, a budget is meant to be blown once in a while. Just don’t use it as an excuse to ditch it altogether.
  • FACT: About 1 in 20 American households owes $8,000 or more on credit cards, according to the Federal Reserve.

You Will Need

  • Spending journal
  • Resolve
  • Sacrifice
  • Willpower
  • Personal finance software
  • A Christmas club bank account

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