How do I Develop a Personal Budget to Plan Savings?

Stop hoarding pennies and create actual savings instead.

Stop hoarding pennies and create actual savings instead.

A penny saved is a penny earned. If you want to put away a fairly good sized nest egg for a large purchase or just want to save some money for a rainy day, then creating a personal budget of your income and expenses allows you to see where your money goes each month.

Step 1

Identify your monetary goal first. If your goal is to put away 10 percent of your paycheck, then you need to plan accordingly. If you want to put aside more than that in your account, you may need to get rid of some incidentals.

Step 2

Find a bank to put your savings into. Money out of sight is also money out of mind, especially if you are trying to build savings for a large purchase, such as a new house. Choose a bank with no monthly fees. Look for a bank that offers incentives with savings plans.

Step 3

Review what you spent your income on last month. Use last month because it already happened, and you can look at how much you spent on going out to dinner or on lattes. Look through your checkbook and online bank statements for this information. You can use this information to cut back on frivolous spending.

Step 4

Calculate what 10 percent of your paycheck is. For example, if you make $1200 a month after taxes and insurance is taken out, 10 percent would total $120. Put that amount in your savings account.

Step 5

Record on a piece of paper what your actual monthly expenses are, including rent, car payments, school loans and credit card bills. Subtract these figures from your monthly income. Also, subtract your calculated savings and a monthly estimation of gas and grocery expenses.

Step 6

The money left over from subtracting all your fixed expenses for the month, is the money you can use for outings, clothing purchases and special occasions. Just stay within your budget and don't scrape from your savings.

Tip

  • Use an online program to create a free budget. The software allows you to track your expenses and helps you cut corners to save a little extra cash each month.

Warning

  • While making your monthly budget, don't forget to pay more than the minimum amount on bills such as credit cards. If you pay the bare minimum, it will take longer to pay them off.

About the Author

Sarah Brooks has been writing since 2008, contributing articles to various online publications. She previously served as a staff reporter for a daily newspaper in Amsterdam, N.Y. Brooks holds a bachelor's degree in magazine journalism from SUNY Plattsburgh.

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