How to create a personal budget to manage your finances?

No matter what type of worker you are, whether self-employed or dependent, it is necessary to have a personal budget, in order to better understand your expenses, income and the type of use you are giving to your money. 

Creating a personal budget helps you manage your finances, allowing you to save or avoid spending on things that are not necessary.

Knowing what is a budget is an important step forward and main personal finance tip.

The elaboration of a personal budget goes through different stages, where you must formulate the plan, discuss and approve it, implement it and finally follow it up. 

Learn more about how to create a personal budget and start developing yours. 

How to create a personal budget to manage your finances
Written by
Table of Contents

Affiliate Disclosure: Some links of products or services will send you to partner websites where we might get a commission by recommending their product & service. 

How to Budget Video

Evaluation of monthly income and expenses to create a personal budget

The main thing to take into account when making a budget plan for personal or family needs is to know the amount of money that comes in through different activities and the expenses that are incurred due to necessary outlays for daily life or generating an emergency fund. 

We understand as income that which adds up to our personal budget, that is, the salary for employment or independent exercise, which can be a fixed or variable amount of money. 

When we talk about expenses or outgoings, we refer to the money that is subtracted from the personal budget, which is directed to fixed activities such as the payment of rent, services or a loan, or variable expenses such as various purchases or entertainment outings. 

Start your budgeting by determining your monthly income, without thinking about the expenses you are going to have, just indicating everything that comes into your bank account or your budget in general. 

It is a summation action, where you will be adding all the money you get on a monthly basis, in order to know what you have to make your fixed expenses. This will help you to stay within your budget and avoid having debts in the near future. 

If you are self-employed or work for contracts, it is good that you know how to make a personal budget in Excel to keep track of the money coming in during the month. 

Do you know where your money is going before the next payday? If the answer is no, it is more likely that the money is not reaching you to cover your expenses, or you don’t know what expenses you are making on a monthly basis. 

For this, it is important to know mainly your fixed expenses, which are defined as the money that must be spent on a particular date in a fixed period of time, normally this includes service payments, rent, tuition, loans. 

But, there are also those variable expenses, which are defined as expenses that are not made on a particular date or time, commonly, variable expenses can be seen with the payment of clothing, accessories, outings, and personal expenses. 

To have a good personal budget plan, it is important that you can easily indicate the fixed and variable expenses you incur per month.

This can help you better understand how much money you are spending on a monthly basis. 

Make a detailed list of fixed and variable expenses, where you indicate, with invoice support if possible, the amount of money that should come out of your budget and why

For example, a personal budget would look like this: 
Item Fixed Expense Variable Expense Amount
Rent payment X $500
Grocery shopping X $100-250
Internet service X $50

Keeping an order of your fixed and variable expenses will allow you to understand what you spend or can spend on variable expenses depending on your monthly income and your fixed expenses.

Prioritizing expenses when making a plan

Girl in hoodie analyzing budget

The importance of a personal budget is best illustrated in this section, as it is the basis for not running out of money before paying for the important things. Learn to prioritize your expenses in order to finish the month without urgencies. 

We define priority as everything that has a higher level of importance than other things, i.e., paying the rent will always be more important than buying a new pair of shoes. In this case, the expense that has priority is the rent payment, and you can cut back any other not important expense. 

Understanding this, it is necessary to know what is a need and what is a desire, which will help when making expenses, since it is necessary to be responsible in order not to leave priorities out of the budget to fulfill desires. 

What is a need? Within a personal budget, a need is everything that is indispensable for the survival of you, your family and your economy. That is to say, if you work from home with the internet, it is necessary to pay for internet service, along with food and various services. 

A desire, is that which is not required to survive, normally can be catalogued as desires, the purchase of new clothes, jewelry, accessories, basic aesthetic changes, among others. It is what normally should not be prioritized in the expenses of a personal budget. 

The priorities and desires change depending on the person, if they have family responsibilities and what they do for a living. All this can vary, so there are types of personal budgets to suit everyone. 

As in the section on wants and needs, the level of importance of expenses in a personal budget, is going to depend on each person. But based on the basic importance of every person, we can explain what it is to prioritize expenses according to their importance. 

At the time of making your expenses, you must indicate the level of importance when making a list of expenses, after this, order them from the highest importance to the lowest, thus knowing what to invest in first. 

This is necessary to do with all the expenses of your daily life, based on the income you have on a monthly basis. 

To start a budget plan, you can assign a specific amount for each expense category, depending on what you can afford to spend on a regular basis.

This will help you set a monthly amount for each category and avoid going over it. 

For example, you can group all services into a single category and assign a monthly budget of an amount that covers the total expense of each particular service.

This will allow you to take into account all the necessary expenses and enter them in the budget. 

Creating a budget plan

After having all the previous sections clear and understood, it is time to get down to work and know how to create a budget plan or your personal budget.

To do this you need to follow a series of steps that will help you in the creation and monitoring of your plan. 

Creating a personal budget plan is not about limiting what you do with the money you earn, it’s about finding ways to make ends meet for what you need, want and should save. That’s why you should create financial goals that are achievable in both the short and long term. 

What do you want to buy next month? What do you want to do on vacation? What will you do for your birthday? From questions like these you can set goals within your personal budget, taking into account the necessary expenses. 

In order to carry out these financial goals, it is necessary to create a savings plan or indicate a percentage of your income to a savings plan, which is going to allow you to meet different long-term goals. 

In economics and finance, the 50/30/20 rule is used, which allows you to divide your initial budget into the different expenses, adding savings to the list. 50% of your income will be directed to necessary expenses, 30% will go to things you want and 20% to a savings fund. 

Many times the income you have does not exceed the amount of total expenses, so it is important to look for ways to reduce expenses, usually the reduction is made in the “things I want” list as they are usually non-vital outgoings for survival. 

To reduce expenses, you can make a list of expenses that can be considered unnecessary or desires, from which you have to withdraw 30% of expenses or reduce the money that you are allocating to certain activities.

Monitoring source of income and adjusting your spending budget

After making your budget plan, you need to be able to monitor and adjust it, in order to adapt it to what is required on a monthly basis. This is because your budget may vary due to changes in your expenses. 

To properly maintain a personal budget plan, you must keep in mind that there are unforeseen expenses and that it is always necessary to make different adjustments in order to continue sticking to a work plan. 

How do you maintain a stable budget? You should keep track of the expenses that are established and make a comparison with your budget plan to know if you are following the plan or if you have had to get out of it because of an unexpected expense. 

Keeping track of your budget allows you to better understand how your economy is moving and make a general balance of the expenses you have and if you are managing it according to the budget you have made. 

Having a plan to control of your finances, allows you to have a conscious spending of your income, so it is not a fixed and immovable budget, so you can make adjustments you think necessary due to unforeseen or necessary expenses that were not within the plan. 

Normally the budget plan adjustment is made when an emergency expenditure is made, allowing you to adapt the plan to a new direction with the new financial amount you are managing.

Daily life can bring unexpected expenses that are not part of our budget planner, therefore, it is necessary to be flexible and open to changes, willing to add expenses that was not within your budget. 

This allows you to keep a money management plan does not become something stressful and a problem in your life, rather, it is an ideal solution to be able to have a savings plan and give you the opportunity to better enjoy your monthly income. 

Stick to your plan and review your budget

Although it can be difficult, the most important thing when creating a personal online budget is to have the ability to follow and respect it.

Certainly there are advantages and disadvantages of budgeting, but it is an elemental area to have in order to progress financially.

Despite trying to be flexible with the budget, it is essential, to stick to necessary expenses and cutting unnecessary expenses. 

The best motivation to follow and respect your personal budget is by seeing the results of having a savings plan, paying for necessary expenses, and being able to treat yourself after meeting mandatory expenses. 

Likewise to stick to your budget plan, it is good to find something that motivates you to stick to it over time. 

When you follow a personal budget plan, it is necessary that at the end of the month you have to be accountable and submit all the expenses incurred, allowing someone else to motivate you to stay on budget. 

Create your personal budget pdf, follow it and stick to it with the support of friends, family or partner, keeping in mind the responsibilities you must fulfill before investing money in other unnecessary expenses. 

A personal budget plan is the solution to stop “running short” before the end of the month. 

Simple Personal Budget Template


  • Salary/Wages:
  • Freelance/Contract Work:
  • Investment Income:
  • Other Income:


  • Housing (Mortgage / Rent):
  • Utilities (Electricity, Gas, Water):
  • Transportation (Car Payment, Gas, Maintenance):
  • Groceries/Food:
  • Dining Out:
  • Entertainment:
  • Personal Care (Toiletries, Haircuts, etc.):
  • Health Insurance:
  • Medical Expenses:
  • Debt Repayment:
  • Savings:
  • Miscellaneous:

Total Income: ________ Total Expenses: ________ Net Income (Income – Expenses): ________

Remember to update this template regularly to reflect changes in your income and expenses.


More about Personal Finances