“A budget is telling your money where to go instead of wondering where it went”---- Dave Ramsey



Budgeting is the most effective accounting and finance tool that helps individuals as well as businesses to be organized and get the desired results. Let's discuss here, how a common person can make their budget in six simple steps.


What is Budget in Simple Terms?

In simple words, a budget is a future plan in terms of money, that tells you where your earned money will go and how you acquire the shortfall of money to meet your financial goals. It is the control room of your money and gives you the direction to get the maximum output by utilizing your financial resource.

Here are the six simple steps to create a personal budget that can help you to control your finances.

  1. Determine your monthly income
  2. Make a list of your monthly expenses
  3. Set your SMART goals
  4. Make a spending plan
  5. Make spending adjustment
  6. Monitor your budget regularly


Determine Your Monthly Income 

The first step is to calculate your net monthly income. Your net home take income would be the amount you get after all your deductions like insurance premium, retirement account contribution, and taxes. Make sure, to include all your incomes to get a net amount of income.


Enlist Your Monthly Expenses

The second most important step is to make a list of all your monthly expenses. Differentiate your fixed and variable expenses. No doubt fixed expenses are inevitable, you can make a cut in variable expenses like entertainment, clothing, and food.


Set Your SMART Goals

Here, SMART goals mean, your goals should be simple, measurable, attainable, realistic, and time-bound. Setting your goals in black and white motivate you to achieve them. You can set your short-term as well as long-term goals.


Make A Spending Plan  

Make a spending plan for the month, here you can set your priorities, and assign spending limits to your expenses. Here you will decide, how much and where your money is going? Critically analyze your expenses and put numbering according to the nature and importance of the expense. By doing so, you will find where you can control your expenses?


Make Spending Adjustments

Here in this section, you analyze your all expenses and incomes. When your expenses total is greater than your total income indicates that you are overspending, and if income is greater than expenses, it's a surplus and a good sign. Always make adjustments to be on your budget.


Monitor Your Budget Regularly

Don't forget to review and monitor your budget regularly. By monitoring your budget regularly you will find the irregularities and correct them according to the budget. It will ensure that you are on the track, so stick to it and make changes accordingly.