Step 1. Get your Personal Budget Tracker
Download our personal budget tracker
Step 2. Determine your Pay Cycle
It is important to fill out the tracker based on your pay cycle because this determines the amount of money received or being spent during your pay cycle or between two pay cheques. If your pay cycle is monthly, then fill out the tracker based on monthly figures. If your pay cycle is fortnightly, then fill out the tracker based on fortnightly or bimonthly figures.
Step 3. Fill out your Projected Costs
Projected costs are those costs that you anticipate so you should have an estimated amount ready to fill out the tracker. Fill out the tracker with all your projected costs during your pay cycle.
If you have any annual bills such as house or car insurance due within the next year and paid as a lump sum, they need to be accounted for in the tracker based on your pay cycle. For example, your expected annual car insurance bill of $1,200 should be costed as $100 (1200/12) each month or $46.15 (1200/26) if fortnightly.
Step 4. Fill out your Actual Costs
Actual costs are those costs that you have incurred, paid or have been billed for. Based on the amount you have paid, fill out the tracker with the actual costs during your pay cycle.
If you have any annual bills such as house or car insurance, mentioned above, you should account for it in your actual costs for your pay cycle even though it is not yet due or paid. After you have accounted for the current pay cycle portion of the annual bill in your actual costs, put aside this specific amount into a bank account each pay cycle until the annual bill is due. This will ensure that when the bill is due you can simply withdraw the money you have diligently been putting away each pay day. You should apply this savings method for all bills that do not fall neatly into your pay cycle.
Step 5. Calculate a Budget Deficit or a Budget Surplus
At the end of the pay cycle, you should be able to see what you have spent your money on by comparing your projected costs with your actual costs. If your projected costs are less than your actual costs you have a budget deficit. This means that you have spent more money on expenses than you had anticipated. Do not worry, it just means that next pay cycle you must keep your expenditure in line and spend even less on some items.
If your projected costs are more than your actual costs you have a budget surplus. This means that you have spent less money on expenses than anticipated. This is great as now you can use the extra cash to save or invest. Check out these articles on how to set Investment Goals and Start Investing Today.
Practical example with the Personal Budget Tracker
Pay Period: Fortnight
Net Pay: $2,600
Calculations
** total to be put aside for bills not falling into pay cycle: $1,252.42.
This amount should be saved in a bank account separate to your everyday account and not touched until the bills are due.
This is how your Personal Budget Tracker will look based on the practical example above.
In this practical example we can see that the projected balance (Projected Income – Projected Costs) is $252.58 and the actual balance (Actual Income – Actual Costs) is $502.58. Overall, this shows we have a total savings or budget surplus of $502.58 which is $250.00 more than projected.
Final word
The purpose of a budget is to identify where your money goes so your finances are manageable. Repeating these steps for a minimum of three to six months will foster the habit of proper money management and catch any bills that occur infrequently or outside one or two pay cycles.
Now that you have the skills to budget effectively, take your savings and check out this article on how to start investing today to grow your money tree.