How to Create a Personal Budget Sample

A viable personal budget is essential to the success of any financial plan. By developing a sample budget, you can make timely bill payments, avoid loan default and set money aside to build your net worth. Before creating a personal budget sample, you should first outline your financial goals. With financial goals in place, you can make savings projections and balance risks versus rewards against each other when putting together an investment portfolio.

Instructions

1

Define your financial goals. Common financial goals include saving up money to provide for start-up business costs, a first-time home purchase, tuition expenses and a retirement lifestyle. Perhaps you will need to save up $30,000 within the next two years to put down on a Miami Beach condominium.

2

Pull up an online financial calculator, and toggle through the numbers to make projections. With the help of a financial calculator, you can determine the amount of money that should be invested at a set rate of return to arrive at a future value of cash.

3

Review your recent banking statements and pay stubs to calculate your current free monthly cash flow. To figure free monthly cash flow, subtract your monthly expenses away from your monthly income. Compare your current cash-flow levels to your financial-calculator projections to determine whether your financial goals are actually realistic. To achieve your goals, you may need to cut your expenses.

4

Categorize your expenses into committed and discretionary expenses. Committed expenses are necessary for survival and for avoiding loan default, such as your monthly rent or mortgage payment, utility bills and gasoline costs to go to and from work. Alternatively, discretionary spending is associated with consumer goods, such as luxury-hotel accommodations and designer clothes, which do not add value to your bottom line.

5

Cut discretionary spending if you are having trouble paying bills and are in jeopardy of falling short of your financial goals. For instance, to free up cash, eliminate cable television and fine restaurant dining from your budget.

6

Consider a major lifestyle change to reduce your committed expenses, if necessary. For example, you could sell your car and move into a smaller apartment closer to work. You could then rely on public transportation, while saving money on car insurance, gasoline and rent.

7

Calculate your new monthly free cash flow after making adjustments to your discretionary and committed expenses.

8

Spend cash to aggressively pay down expensive credit card debt. After your most expensive debt balances are paid off, you should work to accumulate six months' worth of committed expenses in cash reserves. Additionally, you should take out life and health insurance policies that provide financial relief for your family in an emergency.

9

Invest money into a diversified portfolio of stocks and bonds. Stocks perform well during a strong economy, but they are especially volatile amid recession. Alternatively, bonds generate interest income to stabilize your portfolio in most economic conditions. You should increase your bond market exposure as you age and near retirement.