personal budget



A personal budget (for the budget of one person) or household budget (for the budget of one or more person living in the same
dwelling In law, a dwelling (also known as a residence or an abode) is a self-contained unit of accommodation used by one or more households as a home - such as a house, apartment, mobile home, houseboat, vehicle, or other "substantial" structure. The ...
) is a plan for the coordination of the
resources Resource refers to all the materials available in our environment which are technologically accessible, economically feasible and culturally sustainable and help us to satisfy our needs and wants. Resources can broadly be classified upon their av ...
(income) and
expenses An expense is an item requiring an outflow of money, or any form of fortune in general, to another person or group as payment for an item, service, or other category of costs. For a tenant, rent is an expense. For students or parents, tuitio ...
of an individual or a
household A household consists of two or more persons who live in the same dwelling. It may be of a single family or another type of person group. The household is the basic unit of analysis in many social, microeconomic and government models, and is im ...

Purposes of creating a personal budget

Personal budgets are usually created to help an individual or a household of people to control their spending and achieve their financial goals. Having a budget can help people feel more in control of their finances and make it easier for them to not overspend and to save money. People who budget their money are less likely to obtain large debts, and are more likely to be able to lead comfortable retired lifes and to be prepared for emergencies.

Methods of personal budgeting

In the most basic form of creating a personal budget the person needs to calculate their
net income In business and accounting, net income (also total comprehensive income, net earnings, net profit, bottom line, sales profit, or credit sales) is an entity's income minus cost of goods sold, expenses, depreciation and amortization, interest, a ...
, track their
spending Consumption is the act of using resources to satisfy current needs and wants. It is seen in contrast to investing, which is spending for acquisition of ''future'' income. Consumption is a major concept in economics and is also studied in many ...
over a set period of time, set goals based on the information previously gathered, make a plan to achieve these goals, and adjust their spending based on the plan. There exist many methods of budgeting to help people do this.

50/30/20 budget

The 50/30/20 budget is a simple plan that sorts personal expenses into three categories: "needs" ( basic necessities), "wants", and
savings Wealth is the abundance of valuable financial assets or physical possessions which can be converted into a form that can be used for transactions. This includes the core meaning as held in the originating Old English word , which is from an ...
. 50% of one's net income then goes towards needs, 30% towards wants, and 20% towards savings.

Pay yourself first method (80/20 budget)

In the pay yourself first budget people first save at least 20% of their net income, and then freely spend the remaining 80%. They can also choose a 70/30, 60/40, or 50/50 budget for more savings. The most important part of this method is to put one's savings apart before spending on anything else.

Sub-savings accounts method

This method is a variation of the pay yourself first budget, in which people create multiple savings accounts, each for one specific goal (such as a vacation or a new car), and each with an amount of money that should be reached by a specific date. They then divide the amount of money needed by the timeline to calculate how much they should save each month.

Envelope method (cash-only budgeting)

For this method, people need to use
cash In economics, cash is money in the physical form of currency, such as banknotes and coins. In bookkeeping and financial accounting, cash is current assets comprising currency or currency equivalents that can be accessed immediately or near-imme ...
instead of
debit Debits and credits in double-entry bookkeeping are entries made in account ledgers to record changes in value resulting from business transactions. A debit entry in an account represents a transfer of value ''to'' that account, and a credit en ...
credit cards A credit card is a payment card issued to users (cardholders) to enable the cardholder to pay a merchant for goods and services based on the cardholder's accrued debt (i.e., promise to the card issuer to pay them for the amounts plus the o ...
. They need to allocate their net income into categories (e.g. groceries), withdraw the cash allocated for each category, and put them into envelopes. Any time they want to buy something in one of the categories, they only take the designated envelope so that they cannot overspend.

Zero-based budgeting

In zero-based budgeting, all of one's net income must be allocated ahead of spending.

Personal finance softwares and apps

Several personal finance
softwares Software is a set of computer programs and associated documentation and data. This is in contrast to hardware, from which the system is built and which actually performs the work. At the lowest programming level, executable code consists o ...
mobile apps A mobile application or app is a computer program or software application designed to run on a mobile device such as a phone, tablet, or watch. Mobile applications often stand in contrast to desktop applications which are designed to run on de ...
have been developed to help people with managing their money. Some of them can be used for budgeting and expense tracking, others mainly for one's investment porftolio. There are both free and paid options.


{{DEFAULTSORT:Personal Budget Budgets
Budget A budget is a calculation play, usually but not always financial, for a defined period, often one year or a month. A budget may include anticipated sales volumes and revenues, resource quantities including time, costs and expenses, environmenta ...