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How to create a personal budget in 2021?

05 August 20226 mins read by Angel One
How to create a personal budget in 2021?
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Most of us function on a limited amount of funds in any given period. Those working as employees and salary workers are likely to only have a certain amount of income they receive every month, which they have to spread out to cater to all their needs, while simultaneously making some savings and investments if possible. The combination of effective marketing and the sedentary lifestyle we employ has made impulse buying an extremely common trend, resulting in, oftentimes, unneeded and unaccounted purchases that eat up funds allocated to other more important tasks or requirements.

However, it’s likely that you are aware of this, and want to lay down strong financial discipline practices that help to tackle unplanned spending and ensure you are able to successfully cater to all your needs and invest for your future.  One of the first steps you can take is to create a personal budget. With a personal budget in place, all your expenses will be accounted for, allowing you to ensure that you have sufficient funds available for your needs. In this article, we will take a look at how to create a personal budget and a personal budget template, alongside the various benefits of having a personal budget in 2021.

Steps to create a personal budget.

1. Identify your goals.

Before you delve into figuring out how to create a personal budget template and start identifying your inflows and outflows of funds, you must first identify what it is you are creating your budget for. This functions as a thesis statement of sorts for your personal budget and will help outline your financial goals. Identifying your goals before you start budgeting will allow you to allocate funds more efficiently.

There are a number of goals that individuals could have in mind. From short term goals such as saving to purchase a new vehicle or laptop, to long term goals such as retirement funds. The earlier you identify your objectives, the more time you have to plan your personal budget template in a manner that helps achieve your goals.

In addition to identifying your goals, there are also a few other clarifications that you could benefit from. Identifying when you plan on retiring for instance. If you plan on retiring in the next 5 years, then it is likely that your personal budget template will have a larger proportion of funds allocated to developing a retirement corpus, as you are prioritizing savings over expenditure.

2. Identify Your expenses.

Before you begin putting together your personal budget template, you must first identify what your expenses are. This can be done by tracking the expenses you and your family have for a couple of months in order to list out your expenses. Recurring expenses such as bills, groceries, a housing loan payment or fuel costs should be specifically accounted for, as those are costs that will crop up every month. Further provisions can also be made for one-off expenses such as a holiday on the weekend or dinner. Once you identify your expenses, you will have more specific information in order to better understand how to create a personal budget.
There are a number of personal budget templates available online that one can download and use as a starting point for their personal budget.

3. Fine-tune your budget.

Once you have identified your expenses and have successfully learnt how to create a budget template, you are likely to put your budget into action. While it is beneficial to rigidly adhere to your budget, your budget itself needs to be rigid or set in stone. Based on how the first couple of months go, you can reevaluate your expenses and ability to stick to your budget, and make amendments accordingly. Your first draft of your personal budget needn’t be the last. Small adjustments and tweaks allow you to keep your personal budget up to date.

Besides this, make sure to keep two things in mind when working on your budget:

1. Account for the future.

While planning out your expenses, it is not only important to account for expenses in the short run but to also ensure that your account for any future expenses. There are a number of ways to do this and a number of expenses to account for. For instance, you can invest in a retirement fund, and the routine payment towards that fund can be accounted for in your budget. Similarly, purchasing health insurance could also help protect you financially against any medical emergencies that might crop up. Accounting for these future expenses might limit your expenditure on luxuries in the short run, but could provide you with financial stability in the long run.

2. Make sure to live within your needs.

Stretching yourself thin when it comes to your expenses can expose you to a slew of financial problems. While there are a number of options available in the market such as credit card limits and personal loans that could help extinguish our short term wants, they could turn out to be a significant drain on your finances in the future. One could benefit from striking a balance between expenditure on needs and wants while prioritizing needs in the short could set us up to better cater to our wants in the long run.


It is easy to be tempted to take on debt in order to satisfy the short term wants that we have. However, being financially responsible can have a slew of benefits in the long run, even if it might require exercising some restraint in the short run. Creating a personal budget is the first step towards being more financially responsible. Ensuring that you adhere to your budget can help you ensure you are financially healthy, with little to no debt in your accounts. While it is important to account for all your needs and requirements in your budget, it is also important to ensure you prioritise and identify needs and separate them from wants. With the help of a number of personal budget templates available online, creating a personal budget in 2021 is easier than ever.

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