How To Set A Realistic Personal Budget

Mastering the art of budgeting can be a wild journey. One minute you are determined to avoid all unnecessary spending, the next minute you are making it rain at Chick-fil-A or Popeyes for some chicken sandwiches.

We all been there before and it’s okay to treat yourself from time to time. However, sometimes sacrifices have to be made in order to achieve your financial goals.

Anyway, so how do you set a realistic personal budget you can actually commit to?

Well, here’s some good news! Setting your personal budget is very easy! Here’s how.

How To Set A Realistic Personal Budget

1. Determine your financial goals
2. Summarize your expenses, income, and savings
3. Realistically determine what percentage of income will be saved
4. Categorize your expenses and determine what percentage of the balance goes to each expense category
5. Review your budgeted totals
6. Practice discipline and consistency

Determine Your Financial Goals

In order to really commit to your personal budget, you need to align your actions to bigger financial goals. Meaning what’s the main financial reason you are creating a personal budget?

For instance, are you creating a personal budget because you want to dramatically increase your savings? Or are you trying to pay off your credit card debt quicker?

Once you determine your financial goals ensure you make a note of them and place this note where it can easily be seen.

Later on, this note will come in handy when you become tempted to stray away from your financial goals.

In our monthly budget tracker printable, setting goals is important. Hence, the main reason it’s placed at the begin of our budget tracker printable.

All in all, without any goals losing focus and straying away from your financial goals is much easier because you don’t have a “why I am doing this” to fall back on when staying committed to your personal budget is no longer easy.

Summarize Your Expenses, Income, and Savings

Now you have determined your financial goals it’s time to summarize your expense, income, and savings.

So gather your bills, your payslips, bank balances and a calculate preferrable an Excel spreadsheet because it’s about to get real.

Depending on your mood, a nice iced glass of wine might just come in handy. Okay, now you are ready to calculate your budget numbers.

This step is fairly easy the calculate or the spreadsheet is really doing all the work. All you have to do is input the numbers.

At the end of this task, you should have a total for monthly expenses, monthly income, and your current bank balances including your checking and savings balances.  If you don’t have a savings account you will need to visit your bank to open one.

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Realistically  Determine What Percentage of Income will be Saved

Now you have your financial goals noted, total income, total expenses, and current bank balances you are ready to determine what percentage of your income to save.

Yes, here we are considering savings first above all else. While you may be tempted to consider your expenses before saving avoid the temptation.

Remember your financial goals and stick to your plan. Furthermore, brainstorm ways you could make the balance work.

Understand in most cases, sacrifices will have to be made. Plus, creating additional streams of income can definitely improve the situation.

Therefore, start considering how you can increase your income without overexerting yourself.

Now you have determined how much of your income will be saved it’s now time to make the balance work by adjusting your expenses accordingly.

Categorize Your Expenses And Determine What Percentage Of The Balance Goes To Each Expense Category

Now it’s time to divide and conquer your expenses. Start but grouping common expenses together.

Depending on how many expenses you have this process could be completed within a few minutes or it may take a few hours.

However, take your time to do this part because it is vital. Why?

Because this is where you can easily pinpoint the categories you need to spend less money and also the categories you completely need to eradicate because many of the items are pointless spending.

Now you have a clear picture of which categories the majority of your money finances you can now determine which categories or line items you will sacrifice or just get rid in order to stay within the balance after saving.

Review Your Budgeted Totals

Now it’s time to review your budget totals and ask yourself is this realistic? Is this budget possible based on current income, needs, and financial goals? If the answer is yes you are all set.

If the answer is no don’t panic. Instead, revisit your savings total and adjust a little just to give you some breathing space.

However, in the meantime, it’s time to start considering how you will increase your income to fully satisfy your budget needs to achieve your financial goals quicker.

Practice Discipline and Consistency

Setting a personal budget is great but a personal budget is pointless if you can’t maintain it. Therefore, commit to your personal budget by practicing discipline and consistency even during difficult times.

Overall, there may be times when you want to spend money on items not included in the budget but don’t. Instead, fight the urge and seek courage from your noted financial goals.

While there is nothing wrong with treating yourself from time to time remember your “why” and let your “why” be your strength.