If you're looking to get a handle on your spending and start saving for your future, then creating a personal budget can be a great place to start.
This article includes tips, suggestions and general information. We recommend that you always do your own research and consider getting independent tax, financial and legal advice before making any important decision.
A personal budget is a plan for allocating your income to cover your expenses and reach your financial goals.
Whether you're a finance pro or looking to create a personal budget planner for the first time, consider this guide to help build your budget and manage your money.
A personal budget is a financial plan that helps you manage your income and expenses. Think of it as a tool that helps you track how much money you’re earning and spending every month. With a budget, you can:
A personal budget can help paint a better picture of your current financial situation and potentially get you closer to reaching different money milestones, from short-term targets like saving for a holiday to long-term goals like saving for retirement. Personal budgets will look different depending on an individual’s circumstances.
Here’s a step-by-step guide you could consider when building a personal budget:
By keeping track of your spending and making adjustments where necessary, you can ensure that you're saving enough money to reach your goals and have the financial security you need.
When it comes to building a personal budget planner, there are different types available, including:
Ultimately, the type of budget planner an individual uses will depend on their personal preferences and the features that are important to them.
Wondering what the 50/30/20 rule in budgeting is?
The common 50/30/20 rule is a general budgeting guideline that suggests spending on necessities and saving, while still allowing some room for fun and discretionary spending.
With this rule, approximately 50% of an individual’s income would go toward necessities, such as housing, food, transportation, and healthcare. In other words, expenses that they can't live without.
The next 30% is for the fun stuff. This could include spending that involves going out with friends, treating yourself with a trip to the shopping centre, or participating in your favourite hobbies.
And finally, think of the last 20% as spending for the future. For example, this is where you could put money into savings or a retirement account. It’s also a good opportunity to create a targeted plan to pay off outstanding debts like student loans or credit card balances.
It's a good idea to check in on your personal budget regularly to ensure you're on track and making progress toward your financial goals.
Reviewing your budget once a month could help you catch any discrepancies or overspending early on, while checking in quarterly (every three months) could give you a longer-term perspective and potentially help you identify any trends or patterns in your spending. Once a year, you may want to review your budget to set new financial goals and assess your progress over the past year.
To that end, the frequency with which you check in on your budget will depend on your personal preferences and financial goals. Some people may find it helpful to review their budget more often, while others may prefer to check in less. The key is to find a frequency that you can commit to.
When building a personal budget planner, there are several other factors to consider beyond just your income and expenses in the 50/30/20 method. For instance, you may want to incorporate other categories for major goals like paying off your mortgage or reducing your taxable income.
In any case, any personal money management solution should reflect your values and priorities. Consider what is most important to you and allocate your resources from there.
And don’t forget your financial situation may change over time, so build in a cushion for unexpected expenses and be open to adjusting your budget as needed.
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