A personal budget is a finance plan that allocates future personal income towards expenses, savings and debt repayment. Past spending and personal debt are considered when creating a personal budget. There are several methods and tools available for creating, using and adjusting a personal budget.

Sample budget

A budget allocates or distributes expected income to expected expenses and intended savings. The following sample illustrates how income might be allocated.

Average monthly expenses per person in the United States are:

• Food
• Clothing
• Grooming

Tools

The following tools are helpful to have for constructing a personal budget. Regardless of the tool used, a budget's accuracy is only as good as the accuracy of the individual updating budget data; an old budget that does not reflect actual income or expenses is of little use to a current budget. Computer generated budgets have become commonly used as they replace the need to rewrite and recalculate the budget every time there is a change.

Pencil and paper

A simple budget can be written on a piece of a paper with a pencil, and optionally, a calculator. Such budgets can be organized in three-ring binders or a file cabinet. Simpler still are the pre-formatted household budgeting or bookkeeping forms that creates a budget by filling in the blanks.

A discussion of personal budgeting and a Quarterly Budget form (download in .doc format) is available at ThriftyWays.com.

Spreadsheet software

Spreadsheet software, like Microsoft Excel, iWork Numbers or OpenOffice.org Calc, helps to arrange budgets according to need and performs calculations easily with rudimentary formulas. For example, budget spreadsheets are used to keep track of income and expenses. The major reason most people discontinue using budget spreadsheets that don't offer date-shifting is that the information needs to be reentered or moved at the end of each month. Spreadsheets are still excellent for complex budgets and planning.

Money-management software

Some software is written specifically for money management. Products such as Quicken and Microsoft Money are designed to keep track of individual account information, such as checking, savings or money-market accounts. These programs can categorize past expenses and display monthly reports that are useful for budgeting future months.

Spending-management software

Spending-management software such as You Need a Budget (YNAB) are a variation of money-management software. Unlike typical budgeting that allocates future personal income towards expenses, savings and debt repayment, this type of software utilizes a known amount of money, the cash you have on hand, to give the end-user information regarding what's left to spend in the current month. This method eliminates some of the guess work associated with forecasting what a person might receive for income when it comes to allocating jobs for budgeted money. Like money-management software, some spending-management software packages can connect to online bank accounts in order to retrieve a to-the-minute status report of the current monthly budget.