Personal budgeting: What to know and tips for getting started

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.

What is a personal budget?

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.

How to build a budget

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:

• See where your money is going
• Identify areas where you can potentially reduce your spending
• Plan for future expenses
• Allocate funds to different expense categories

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:

1. Determine your income: Calculate your total monthly income from all sources, including your salary, any rental income, or side-hustle earnings.
2. List your expenses: Make a list of all your monthly bills, including debt. Include both fixed (like rent) and variable expenses (like groceries). Then add your expenses into your personal budget.
3. Track your spending: Keep track of your spending for one or two months to get a more accurate idea of your expenses. This could help identify areas where you can potentially cut back.
4. Categorise your expenses: Divide your expenses into categories, such as housing, food, healthcare, and entertainment.
5. Create your budget: Using the information from the first four steps, you’ll be ready to create a budget that allocates your income to cover your expense categories. Consider leaving some room for savings and unexpected expenses.
6. Review and adjust your budget regularly: Your financial situation may change, so it's important to review and adjust to make sure it remains relevant to your means and goals.

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.

Choosing a budget planner

When it comes to building a personal budget planner, there are different types available, including:

• Spreadsheets: You can create a budget using a spreadsheet program like Microsoft Excel or Google Sheets, allowing you to customise your budget to your specific needs and track your spending.
• Budgeting apps: There are many online budgeting apps and financial management software platforms that can help track your spending and create a budget. Many offer free versions with limited features or premium versions via paid monthly subscriptions. Other costs may apply.
• Pre-made worksheets: There are also pre-made budgeting worksheets normally available at a low cost of for free online that you could print and use. These could be a good option if you're just starting out and need a simple way to get started with budgeting.

Ultimately, the type of budget planner an individual uses will depend on their personal preferences and the features that are important to them.

What is the 50/30/20 rule?

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.

The 50% – Necessities

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 30% – Wants

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.

The 20% – Savings and debt

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.

How often should you check in on your personal budget?

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.

Other things to consider when building a personal budget

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.