How to Create a Personal Finance Budget
and Stick with It

Looking to develop a personal finance budget so that you can finally take control of your money?  Well you’ve come to the right place!

Personal finance budget

I’d like to start by saying that there is no one-size-fits-all approach to developing a personal finance budget.

We all have different needs and different living situations so if the budget is not customized to fit your life, chances are that it won’t succeed.

Budgeting only works when it works for you!

While budgeting might seem like a boring, tedious exercise, it really sets the foundation for achieving all your financial goals. 

Below I will share my experiences and share techniques for developing your own personal finance budget that will be easy to follow and one you can stick to.

As with many things in life, consistency is key.

How to Create a Simple and Effective Personal Finance Budget

During the holidays at the end of the year I like to take some time off to spend with family and reflect on what happened over the past 12 months, both personally and professionally. I think about both my successes and failures, as well as look towards the future by planning out strategies to reach the financial goals that I aim to achieve in the following year. 

This typically consists of the following steps:

  1. Calculating my estimated monthly take home pay
  2. Estimating my monthly expenses
  3. Allocating the remaining amount towards my financial goals 

Obviously, you can only get to step 3 if your income exceeds your expenses. However, my goal is to provide you with tips on creating a personalized plan that will be both easy to follow and flexible enough to handle the curveballs that life throws at us sometimes.

Benjamin Franklin said it best: “If you fail to plan, you are planning to fail!” Your personal finance budget is your roadmap to success with all routes, detours and rest stops marked.

If you fail to plan, you are planning to fail!

- Benjamin Franklin

Step 1: Calculate Your Monthly Income

A successful personal finance budget starts by calculating how much money is coming in to your bank account each month.

If we don’t know how much is coming in, how can we begin to plan for how much can go out?

Primary Source of Income

If you are a salaried worker this number is really easy to calculate.  Take your total annual salary and divide by 12 to roughly calculate your gross monthly income. 

If you work a stable hourly schedule, you can also reasonably calculate your income by multiplying your hourly wage by the number of hours you work each week.  Then multiply that by 4 to estimate your gross monthly income.  

If you are self-employed or a gig-worker, do your best at calculating your monthly income by tracking your income for the past three months and then taking an average.

Additional Income Sources

Then consider any additional income sources you might have such as your side hustle, dividends, royalties and affiliate income.

Add these to your personal finance budget income.

Adjust for Taxes, Medical, 401K, Etc.

Finally let’s make a rough adjustment to account for income taxes, medical insurance, 401K contributions, and other costs that are withheld from each check.  

I’ve found that subtracting 25% of my gross total gets me to a reasonable estimate of my take-home pay.  This will vary depending on your situation of course, but I think adjusting by 20-30% should work for most people.  Test it out and adjust accordingly.

Step 2: Estimate Your Monthly Expenses

Personal finance in a nutshell is basically “spend less than you make.”  Once you can do this, it’s simply about organizing where you send the remaining cash each month (towards debt, savings, investing, etc.). Maintaining a positive cash flow will allow you to make progress towards any personal finance goal you might have.

Budget jarsGetty Images

Let’s say your goal is to crack the 5-figure club and save $10,000 for a rainy day. Your first step towards reaching this milestone is to create a personal finance budget so that you can plan out how much you have to save each month in order to reach your goals (and how long it will take to get there).

But before we can even think about saving, we have to make sure that we can keep food on the table, the roof over our heads, and meet all other financial obligations we have each month. The best way to do this is to track our monthly expenses, and spend less than we make.    

After all, even if you make a million dollars per year, if you are spending a million each year, you are no closer to achieving your goals than you were on January 1st.  On the flip side, if you make $50,000 and save $5,000, you are making excellent progress towards your goal and will be there in roughly two years.  

So how can we best estimate our monthly expenses?

Personally, I use the free budgeting tool at to calculate my monthly personal finance budget and set both my short and long-term goals.

We can also create a quick spreadsheet using Microsoft Excel or Google Sheets. Let’s start by dividing our expenses into two main categories: Fixed and Variable.  Then further into subcategories: Needs and Wants.  Some examples can be found in the chart below:

After identifying your expenses, insert a column to the right put an estimated amount that each will cost you into the cell next to it.

Fixed Expenses

Fixed expenses are costs that are the same each month, and typically things that we need to survive.  

No, Netflix is not essential for survival, even though it costs the same each month


Typically, necessary fixed costs would include things like mortgage payments, rent, car payments, and the minimum amount you have to pay monthly on your credit cards.

These expenses are easy to calculate because they don’t change month to month.  

Add all these items and their associated costs to your personal finance budget spreadsheet.


Your Netflix subscription would fall into the “Wants” category since it is we don’t need it to survive.  However, this doesn’t necessarily mean we have to cut it out of our budget.  As I said before, a budget only works if it works for you, so if you have extra money at the end of the month and you want to spend some of it on a Netflix subscription, go ahead! You’ve earned it!

Count up all items that fall into the “Fixed/Wants” category and add them to your spreadsheet.

Variable Expenses

Variable expenses are costs that fluctuate from month to month. 


Necessary expenses for this category include things like gas, electricity, and food.  You gotta eat, but you probably don’t know exactly how much it will cost every month since the cost of food varies. For these items, let’s track the amount of money we spend in each category (food, gas, utilities, etc.) for three months and then calculate the monthly average for each to use in our budget.

Reminder does a great job of automatically pulling in your expenses from all your credit cards and then categorizes them for you, making this step a breeze.

This can also be done manually if you’d prefer to keep track on your own with a spreadsheet.


I like to call this the “everything else” category.   


Because there will always be additional costs each month that arise unexpectedly or that we don’t know how to accurately predict. 

For those times when you join friends for happy hour.  Or decide to take the family out for ice cream. Or when you stumble upon those irresistibly stylish pair of shoes at the mall that you just have to have.    

You deserve to splurge every now and then; otherwise, you might not want to stick with your personal finance budget if you feel it is too restrictive. Afterall, you earned this money, so you should get to spend some of it on whatever you want.  

Let’s track the average cost for variable wants for three months and create a monthly average for use in our budget.  To help you meet your financial goals faster, consider cutting back on this area whenever you can.

Step 3: Allocate the Remaining Amount Towards Your Financial Goals 

Now the fun part! This is where we get to decide how we are going to put our money to work for us by paying off debt, investing or building that emergency fund.  

So what are your financial goals? Are you looking to pay off debt, or aiming to build wealth?

Emergency Fund

Before tackling some of these long-term goals, I recommend starting an emergency fund. This will be money we will put away and forget about, only to be used in… you guessed it, emergencies. Think of the peace of mind that it will give you to know that if something goes wrong, you won’t have to scramble to find the money or take on additional debt.  

Before we even think about investing, let’s start by saving your first $1,000.  This is a huge accomplishment and one that approximately 69% of Americans are struggling to meet. Then let’s add to it over time until you are able to accumulate six months of living expenses.  I know this sounds like a lot of money, and it is.  Just know that this won’t happen overnight, but it is definitely possible if you stay focused and consistently save over time.  

After saving your first $1,000, I’d split your extra money between your savings and any high interest debt.    

High Interest Debt

Debt from credit cards, payday loans, and the like usually carry a mind-boggling interest rate upwards of 20-30%. If you think of your money as energy (since you probably put a lot of energy into making that money), having to pay interest rates like these can feel like you are swimming upstream. You are wasting energy (unnecessarily) by swimming against the current since every month a portion of your paycheck goes towards paying the credit card interest and doesn’t even make a dent in the amount you owe.  

It would be far easier to swim in a still-water lake because with each stroke you are making that much progress towards your goals. So as soon as you save your first $1,000, prioritize paying off your high interest debt with a bit of your paycheck each month.


Once you’ve eliminated credit card debt and established your emergency fund, its time to start focusing your personal finance budget towards building wealth by investing. 

With savings account interest rates hovering around 1%, there’s no way you can “save” your way to millions of dollars.  Unless you can live to be 172, the rate of growth is not going to help you very much and your money will actually lose value to inflation. 

The only way for the average person to truly build wealth (unless you become a Youtube sensation, the next LeBron James, or find a pot o’gold) is by investing your money. Whether it be in stocks, real estate, or by starting your own business, you have to find a way to make your money work for you.

Don’t start investing until you have paid off your high interest debt, however.  An average return for any given year in the stock market is 8%, but with the interest rates on high interest credit cards averaging 25%, you’d often get a much better return on your money just paying off debt.  Think of it as getting a guaranteed 25% for every dollar of debt you pay off.  That’s a return most investors could only dream of!    

How to Grow Savings Faster

If the amount you are left with after subtracting your expenses from your monthly income is lower than you had hoped, you can adjust this in one of two ways:

  1. Cut expenses
  2. Make more money

Since there are only two variables in our formula, increasing the amount that you are able to save each month boils down to one of these two options.  See our page on the baby steps to tackling debt for help with developing a winning strategy on eliminating debt forever.  Then check out our page on how to generate additional income for proven techniques on adding more money to your checking account each month.

How Much Should I be Saving Each Month?


There is no one-size-fits-all approach to the amount you should be saving.

First concentrate on generating a positive cash flow each month, then everything else can fall into place. 

We should never compare ourselves to our peers since we all have different jobs, different living situations, different needs, etc. 

However, if you want some numbers to shoot for when structuring your personal finance budget, I’d recommend the popular 50/30/20 budget rule.  In her book, “All Your Worth: The Ultimate Lifetime Money Plan”, Elizabeth Warren describes this simple plan to help people achieve their financial goals. 

In essence, you should aim to spend no more than 50% of your income on needs, 30% on wants, and 20% should go towards savings and other financial goals. The more you can minimize the combined 80% spent on needs and wants, the more money you can allocate towards reaching your financial goals quickly.

Will a Personal Finance Budget Work for Me?

Hopefully this article has shown that with a little planning, creating a personal finance budget that works for you is completely doable. As I’ve said previously, it really boils down to tracking expenses so that you don’t exceed your monthly income, automating your savings, and sticking with the plan long term.

With your roadmap in hand, you now know all the steps you need to take to reach your goals. However, at the end of the day, your success is up to you.  A personal finance budget is the all-important first step towards reaching your financial goals, but it is up to you to put the plan into action and to stick with it over time. 

Just know that it can be done. Draft a personal finance budget, give it a try for a while, and tweak it if need be. When I find that I’m struggling to pay all the bills and meet my monthly savings goals, I’ll either try to make a little extra cash, cut down on unnecessary spending, or maybe adjust any aggressive savings goals to something more realistic.     

As long as I’m living within my means, sending some cash each month towards savings / paying off debt, and still able to enjoy life, I know that I am making good progress towards my goals, and you can too.

Let’s make it happen!

So what are your personal finance goals?

Have any techniques that would be useful to share?  

I’d love to hear from you!

Share your success stories by commenting below and dropping a like on this page if you found the information useful.

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