How to Create a Personal Monthly Budget Plan

/ BY / Personal Finance

A budget customized to fit your specific needs can be a powerful tool--one that helps you maintain control of your personal finances. It’s easy to build a budget that suits your style—all you need is some time, paper, and a pencil.

Getting Started

Before you can build a budget that’s accurate and useable, you need to know exactly where you stand financially. Using bank statements, receipts, and bills, make a list of your fixed and flexible expenses and your total income.  

A fixed expense is one that never changes, such as your mortgage or car payment. Flexible expenses are ones that change monthly, like utility bills.

Funding Your Fixed and Flexible Expenses

Once you have your expenses listed, you can start figuring out how much you want to spend each month on each category. One of the most important (and challenging) aspects of designing your personal budget is deciding how much money to allot to each item on your expenses list. At first glance it may seem like there is little wiggle room in your budget, but a closer look can usually yield some extra cash. Fixed expenses can be lowered by implementing such simple methods as

  • shopping with a grocery list and using coupons
  • switching from high to low interest credit cards
  • buying more affordable home and auto insurance

The more money you cut, the more you have to put towards your financial goals, such as saving and debt reduction.  Funding your financial goals for the future is the exciting part of budgeting. Be sure to adjust your spending in areas like the ones listed above so that you can make measurable progress towards your goals.

Budgeting for Debt Reduction

If your list of expenses includes credit card debt, now is a good time to build a pay-down plan into your new budget. Credit cards for average credit usually carry a higher interest rate than those offered to applicants with good credit scores. If you are paying a lot in interest each month, check out the low interest credit cards that may be available to you now. A lower interest rate will allow you to pay down debt faster.

One of the perks of carrying a low or paid off credit card balance is a bounce in your credit score. Credit scoring is complicated, but you can realize a nice jump by paying off your balances and then making it a habit to pay off your bill monthly.

Qualifying for new credit at good rates is important when it comes to purchasing a home or new car, so paying down your existing credit makes a lot of sense. Remembering all of these advantages helps when it comes time to decide on how much money to allocate towards your expenses.

Reassessing and Adjusting Your Budget

A good budget is constantly changing. Once you’ve had a chance to live with your budget for a month or two, take a look at how well your budget is working for you. Tweak areas that are causing you trouble by examining your spending habits and readjusting your allotments.

It’s not a bad idea to make it a habit to review your budget each month. Fine-tuning your budget regularly will make your budget more helpful and will also allow you to observe the progress you are making.

A budget is the best money management tool available. By using one that works for you, you can improve your financial situation and enjoy the peace of mind that comes with knowing exactly how your money is working for you.

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Please note your financial situation is unique and our tips & advice presented here may not be appropriate for your situation. CreditCardXpo.com recommends that you seek different advice & opinions from your own accountant or financial adviser who understands your individual circumstances before making any important decisions or implementing any financial strategy.