Format

• The simplest personal budget format is a pair of lists: one that lists all of your income, the other all of your expenses. On paper, this may take the form of a ledger with two columns: debits or expenses and credits or income. A computerized budget may use two separate tables on a spreadsheet or appear as two lists in a word processing document. At the bottom of each column you'll enter totals for each category. If your income is higher, you'll have a budget surplus that you can save or use to pay down debt. If you have a shortfall, it means you haven't made enough to cover your expenses and you'll need to borrow money or find ways to cut spending. Even the most complex budgets are based on this basic model.
  
  

Components

• Your budget must include every source of income and every single expense you have. Leaving out even small items can throw your budget off and lead to inaccuracies over time. The income portion of your budget needs to include not only your work earnings, but also any money you receive from investments, including bank interest and stock dividends, as well as regular payments such as retirement benefits, social security payments or disability insurance payments. As for expenses, rent, mortgage bills and car payments are likely to comprise the majority of your budget. Other expenses such as cable television bills, cell phone bills, household utilities, regular charitable donations, clothes, food and child care payments will also be recorded.
  
  

Budget Types

• Most personal budgets are useful when they cover a single month, since this is how often many bills come due. It's also a reasonable time frame to consider your income versus your expenses. However, because some expenses only come up once or twice a year, you should also compose an annual budget. It can have the same form as a monthly budget, but most items are multiplied by 12. An annual budget should include non-monthly expenses such as vehicle registration and insurance, holiday gifts, vacations and property tax. If you don't have ample savings or a monthly budget surplus, it's essential that you make an annual budget or you may not have enough money to meet these major expenses as they come due.
  
  

Analysis

• Once you have a basic budget you can start examining and analyzing your personal finances. For example, you may find it useful to categorize your expenses into essential spending, utility bills, entertainment and medical costs. You can add up the cost of each category and divide it by your total monthly or annual expenses to find out what percentage you spend in each area. If you note that you're spending 30 percent of your budget on entertainment, it may serve as an indication that you need to cut back in this area. If housing takes up more than half of your budget, it might be time to look for a lower cost rental unit or refinance your mortgage.