Your #1 Personal Budget Guide

Ultimate guide to personal budgets

If Personal budgets were a food, it would be the dreaded Brussel Sprout.

Poorly completed budgets do not work.

Personal budget

They end up leaving you in a poor position and a bad taste in your mouth. So, don’t let that happen to you.

You are guaranteed to place it in the too hard pile!

This does no one any good.

If I’m honest with you, I myself am a spender.

I love going out, enjoying good food and wine, holidays etc.

If I did not have a budget there would be way too much month left at the end of my money!

With a budget I make sure that does not happen.

I am going to show you everything you need to know about budgets. From the different types right through to different templates and worksheets you can use for FREE!

Now, if you have read any of my other articles you will see that I’m huge on GOALS! If you’re stuck on completing these – Jump to the GOALS section here and within 15 mins you’ll be set! You can come back and then read the rest of this article.

If one of your goals it to invest for the future. Check out our detailed rentvesting strategy article.

Now, budgets are easy to put in place. However, It’s the implementation and discipline you need to ensure you stick with them.

Don’t worry though, I’ll share with you a few tricks that helped me to stay the course.

Now, a lot of people think you need a complicated budget software to help you. That’s not true!

You can use a personal budget excel template, or you will find an online personal budget planner. It doesn’t matter what you use. Subscribe and we will send you ours!

What is a Personal Budget

A budget is just a tool. Like a hammer for hitting a nail into wood.

A budget is used as a financial planning tool which allows you to track your incomes / expenses and spending habits.

Now, unless you are a personal finance guru. And I’m betting that 99.9% of you aren’t.

barefoot investor

There is a book that I have recommended for years. Scott Papes the Barefoot Investor is one of the best personal finance books available.

If you have read it. Go re-read it. If you haven’t I recommend purchasing this book ASAP.

I’m going to give you a little task.

If you’re a couple what I recommend is this. Buy 2 books!

One each.

What you do is that you give yourself 6 days to read the book cover to cover. Whilst reading the book you each have your own highlighter.

(Remember to read the books individually & don’t make any comments to each other.)

Throughout reading the book you highlight the sections of the book that resonate with you, things that you feel you should be focusing on and the items that you want to make a priority.

Now on the 7th day, you sit down with your partner. Bottle of wine to share and go through the books so you can identify what each of you highlighted as important.

personal finance

Now write down a column of similarities and then a column of differences. This will become your discussion points later.

The reason I recommend this first is that it allows you both to understand what the other see’s as important.

By doing this you can discuss the points of difference and why they matter.

This simple act sets you up for success. It gets you both on the same page and communicating.

Now, if you need more information about a certain topic, You Tube literally has everything you need to self-educate yourself. This just helps lay the first pillars and points you in the right direction.

After this you can move into the 7 steps of implementing a personal finance budget.

The 2 Main Ingredients Needed For A Personal Budget

There’s a lot different budget advice out there.

I’m not going to do a budget planner review. No, I’m going to explain how I set up my own personal budget & what obstacles I came across. But, more importantly I’m going to explain how I overcame them to make it work for me.

When I’m talking about setting up a budget, there are 2 ingredients you must have if it is to work.

financial goals



The reason you’re here is probably because you have tried to set up a budget, you might have been somewhat successful.

However, I bet at times you failed & you’re looking for some help?

Sound like you? Well, you’ve come to the right place.

With the 2 budget ingredients, don’t be alarmed if you are concerned about how disciplined you are.

Discipline is something that is a habit, I will show you how to form that habit over the first 90 days.

The one thing you absolutely must have in place first though. Are your GOALS.

As already mentioned above you can read our article why it is so hard to save money. There’s a section on goals and a goals sheet you can download for your own use.

Keeping on track of your budget will be difficult at times, however if you consistently remind your self on why you are doing this. You will have a much easier time. Remember when I mentioned GOALS?

Well, goals to budgets are what rail road tracks are to trains.

Sometimes though, I find it difficult to keep to a specific budget for a long period of time. So I factor in budget breaks!

Budget Breaks

We aren’t robots. So, to help my sanity & to help me stay on track with my saving success, I set up what I call “budget breaks”.

These are allowable expense allocations you can use for whatever you want.

budget breaks

Think of them like mini rewards for your hard work.

A lot of people might think that these are a step back, however that’s not true.

Dwayne Johnson consistently Instagram’s his “cheat meals”. This is the same concept.

To stay on track you have to allow yourself a small amount of freedom, otherwise the stress of having such restrictions can build up and then you have a massive blow out and never get back onto the track.

They don’t have to be the same set $ amount each time.

For example, one month mine consisted of going to a movie. Then next month was a Saturday at the club having a punt on the ponies.

What is important is to set yourself a limit, don’t go over it. Allow yourself that time to enjoy, then continue with your budget.

The 3 different types of budgets

Now, when you are putting together a budget there technically are 3 different types. Each of these budgets deminstrate how your finances were managed for that specific period.

We always recommend monthly budgets. It makes it easier to manage, it’s not too frequent that it becomes a chore. Also, not to lengthy period that you can fall off track.

Deficit Personal Budget

Basically if you have a deficit, all it means is that you lost money for that given period.

deficit personal budget

When you are putting together your personal finance budgets you must remember.

Some months will run at a loss…

Why? Well, simply because we might have a large expense for that period.

Car insurance, property rates, medical expense, holiday.

Whatever the case is, you just need to remember that having a couple of months as a deficit isn’t the end of the world.

The problem arises when we have multiple / consecutive deficit months and this then becomes a habit.

Most people who don’t have a budget in place tend to fluctuate from surplus to deficit quite often.

These radical up and downs create a lot of mixed emotions that can hurt relationships. Not too mention you can feel like a hamster on a wheel going around in circles.

So, if you’re running a deficit budget then beaware that you a probably living off credit and creating a financial black hole for yourself.

Balanced Personal Budget

When we think of balanced we think it’s a good thing, right!?

balanced budget

Work / Life Balance

Balanced Diet

But, when it comes to a budget it’s not so good.

Balanced basically means that you neither have a surplus or a deficit. You are like a hamster on a wheel. Not getting anywhere.

The main issue that I see with this type of budget is that many don’t even realise it.

You think, how could one not realise they weren’t going any where.

Well, this is because that usually it’s only apparent over a longer period of time to see it.

For example, a couple has 3 months of surplus, then follows that with 3 months of deficit.

Over that 6 month period they may have only broken even. They don’t see that continuous vicious cycle they have fallen into. The up/down round and round financial pattern that stops most people from actually achieving their goals.

This is why it’s important to review your financial budget monthly / quarterly and yearly to ensure that you aren’t stuck in this cycle.

A lot of people subconsciously fall into this pattern as they believe because they had a few good months that the bad financial months won’t matter.

This is human nature. But you need to be aware that it can hinder your progress.

Surplus Personal Budget

surplus personal budget

Now this is the budget that everyone strives for.

Having money left at the end of the month.

Now if you’re anything like me you can find sticking to a strict budget tedious.

However, At the end of the month when you look at what you just achieved while enjoying a cold beer or a wine.

It just makes it all worthwhile.

If you have a lot of bad debt, implementing a surplus budget might be rather difficult.

However, remember that by paying down bad debt so that you end up even is still a great thing as you’re working to improve your current financial situation.

So remember when working out a budget, paying down more than minimum monthly repayments on debt is considered a surplus payment.

Running a surplus budget is usually directly aligned to your financial goals & your time frame to reach those goals. So remember, it’s not an exact science. If you fall short one month, see what you need to do to make it up next month.

If you can’t, then just make sure you adjust your financial goal time frame to keep everything as accurate as possible.

The 7 Steps To Prepare A Personal Finance Budget

Now, perparing a budget is actually quite simple.

You will need to gather a few bits of information and spend some time collating so that you can correctly break things down. But, overall it can be completed in a rather short span of time.

What we will go through are the 7 basic steps to put together your own financial budget.

Firstly Do A Review Of Your Current Spending Habits

financial needs vs wants

Now, I’m going to be honest this step can be confronting!

You know that saying face your Fears!?

Well that’s how I was when I first did this.

Firstly we want to look into the last 3 months of our current spending habits.

So print out the last 3 months and sit down and go through it line by line and highlight in green all the expenses that are needs (need is something you must have to live).

Highlight everything else in red, these are your wants (things you want but don’t actually need).

If you want to look into more about what needs & wants are CLICK HERE.

This step is to really just give you an idea of what you are currently “wasting” money on that you can tighten up when you go through and complete the budget portions.

Remember, little things add up. For a couple 1 coffee bought each morning on the way to work over the course of a year is over $2,000!

Now, something that’s crazy. If you invested that $50 (approx) coffee money each week after 30 years you would have nearly half a Million dollars!

So is your daily cup of coffee that you buy each day worth $500k in retirement?

Set your GOALS

Without goals your budget has a very high chance of failure – GOALS give us something to commit to.

Something that we as an individual or a family can strive to achieve together.

Providing yourself with a purpose is powerful.

However, you must make sure you are all on the same page! Nothing derails a GOAL plan or relationship more than having different financial interests that make the other upset.

Now the 3 points to consider on why GOALS work are these

  1. Keeping you focused
  2. Reduces Stress as it’s easier to make decisions (either within the budget “yes” or not “no”
  3. Provides you with accountability

Some people over complicate the GOALS process.

Focus on Short (12months) / Medium (1-5 years) Long (5-10years).

financial goals

Once you have these down you should review them every quarter (3 months) and adjust as necessary.

Identify your Incomes

personal budget incomes

Now it’s important to go through all your income sources.

For most people this will be their current employment income & perhaps some rental income (if you have investment properties).

Remember to put the income into monthly averages.

The untimate goal is to have investments that provide you with a passive income.

Just remember that this takes time, the earlier you start a savings plan. The sooner you can start investing this money to make it work for you.

Create a Monthly List of All Expenses

Now, if you remember step 1, you should have already printed out your last 3 months statements and highligheted your “need” expenses and “want” expenses.

A list of expenses could look like

  • Mortgage repayment
  • Rental payment
  • Insurances
  • Car repayment
  • Child care
  • utilities
  • entertainment
  • credit card min repayment
  • Eating out
  • Holiday

Most of these items should easily be identified in the last 3 months of your bank statements. However, just remember that some expenses are seasonal or yearly. So these you should make sure you take note of these.

Once you have written down all your expenses you can start to cut out the ones that you feel aren’t helping you get to your GOALS!

Remember: Cutting out wasteful expenses is a good way to get your budget into a surplus!

Allocate a Budget Break $ Amount

Ok, now that you have successfully completed your GOALS, Incomes & Expenses you should now have a pretty good idea of where your money is going.

budget breaks

Time to factor in some budget breaks.

Remember, these are rewards so I tend to factor them into the end of the month to keep me on track.

How much you spend on your budget breaks is completely up to you!

However, don’t go overboard.

Usually 2.5% – 5% of your net monthly income is a good place to start.

I’m closer to the 5% and do 2 different budget break activities.

1 with the kids & 1 by myself.

You might want to roll your budget break $ into 3-4 different activities. That’s fine! Whatever suits you and your lifestyle.

I’m a divorced single father of 2 kids so have my children 1 week on 1 week off. So I structure things around the schedule.

One thing I have found is that the more you plan the more you get out of your budget breaks. I love spontaneity, however, by planning you can usually find great activities that you might miss if you didn’t do some research.

Use A System To Track Your Personal Budget

Ok, This is one of the most important aspects of any personal budget… Track Track Track!

There’s a lot of different ways you can track your budget spending.

track your budget progress

You can set up an Excel Spreadsheet that you manually enter your income and expenses in each week or month. Alternatively, there are a lot of automated budget software programs that you can link your bank account to which make tracking a lot easier.

Personally, I like the manual excel way. However, I do have a background in financial analysis so I actually enjoy this part of the budget process.

For those of you that want it to be as easy as possible I recommend YNAB. It’s simple, and helps you keep track of your situation.

It doesn’t matter what you use, just that you use something to track your progress.

Review Your Budget & Goals

The only thing we really know about change is that things change. Always, and forever!

Knowing that things change is the reason why you MUST review your financial GOALS and personal budget each quarter at the very minimum.

It doesn’t take long, you just need to look over your GOALS, make sure they are still relevant to your situation. Then you review the previous 3 months budget and see what you succeeded at or what you failed at.

Remember, you will fail some of the time.

However, if you planned your budget correctly you will find that you have formed a new habit of spending only on the items within your approved personal budget. The first 90 days have allowed you to break your old habits and create some new ones.

This will make the next 3 months much easier as you’re already used to the type of spending & saving pattern.

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Andrew Mitchell