How to Use a Personal Budget

A personal budget can help you keep your spending under control.
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Like many others, you may wonder where your money goes. Keeping track of your income and expenses in your head can leave you with less in your pocket than you expected. A written budget provides a visual plan of how you intend to spend the money you earn. Think of your personal budget as an ongoing financial projection that allows you to pay bills, lower credit balances and save for the future.


Many people create a monthly budget to avoid debt problems. Although it may feel like the budget is restricting your freedom, a budget actually puts you in control, allowing you to determine how you will spend your money. A written budget will also help you uncover hidden spending, helping you understand why your bank account seldom has as much money as you expect.

Planning Ahead

Create your personal budget by planning your spending ahead of time. Look over your old bills and receipts to determine how much of your paycheck to allot for each area of spending. Make a list that includes recurring expenses that remain the same every month, such as automobile and mortgage payments. Include monthly bills such as utilities, telephone, insurance premiums, and television and internet services.

Since some bills vary monthly -- such as heating and cooling bills -- add a year’s worth of past bills, and divide by twelve to determine the average amount for each month. Include amounts for other items you regularly spend money on, including clothing, groceries, gifts, salon services, and recreation. Determine how much money you need to save every month for savings or retirement accounts.


Use your spending record to formulate your monthly budget. Make a column for every expense, including a space for miscellaneous expenses. Write in the amounts you expect to spend during the coming month. Write down your expected income for the month. Subtract your potential expenses from your income to determine how well your income and expenses balance.

If you are in the red, eliminate or reduce some items from your expenses column. Cut back on unnecessary spending; for example, eliminate a couple of golf outings or movie nights. Use the extra money to increase your savings account, or pay down your mortgage, rather than frittering it away on non-necessities.

Keeping Track

Write down the amounts of all the purchases you make, and bills you pay, during the month. Make it a priority and a habit to keep your purchases within your allotted amounts. For instance, if you allow yourself $100 per week for groceries, shop carefully to avoid going over your budgeted amount. Assess your spending again at the end of every month to determine how well you stay within your budget.

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