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How to create a personal budget plan you can actually stick to

Master your finances with this step-by-step guide to creating a personal budget plan that works. Set goals, track income and expenses, and stay motivated for long-term success.

Published : March 16, 2023

Author : Tom Norman

Financial stability and independence are highly sought-after goals for many people. However, achieving these objectives requires a solid understanding of your financial situation and a commitment to responsible money management. One of the most effective tools for managing your finances is a personal budget plan. By creating a budget that works for you and sticking to it, you can make better financial decisions and ultimately achieve your financial goals. In this blog post, we'll cover how to create a personal budget plan you can actually stick to.

Step 1: Determine Your Financial Goals

Before creating your budget, you must first identify your financial goals. Are you looking to pay off debt, save for a specific purpose, or build an emergency fund? Having a clear understanding of your objectives will help you allocate your resources more effectively and maintain motivation as you work towards achieving them. Additionally, make sure your goals are realistic and achievable within a reasonable timeframe.

Step 2: Track Your Income and Expenses

To create a budget, you need to know exactly how much money is coming in and going out each month. Start by tracking your income from all sources, such as your salary, freelance work, investments, or government assistance. Next, categorize and list all your expenses, including rent, utilities, groceries, entertainment subscriptions, and any other bills or debts.

You can use a simple spreadsheet (such as a table in Craft), budgeting apps, or even pen and paper to track your income and expenses. Do this for at least one month to get an accurate representation of your financial habits. This exercise will not only help you understand where your money goes, but also reveal areas where you can cut back or make adjustments.

Free Personal Budget Planner Template
Use Craft's Personal Budget Planner to get track and manage your finances

Step 3: Create a Budget Based on Your Needs and Goals

Now that you have a clear picture of your income and expenses, it's time to create your budget. Begin by identifying your essential expenses (needs) such as housing, food, utilities, and transportation. Ensure that these needs are covered first, as they are non-negotiable.

Next, allocate a portion of your income towards your financial goals, whether it's paying off debt, saving for a specific purpose, or building an emergency fund. Prioritize these goals based on their importance and timeline.

After covering your needs and goals, you can allocate the remaining funds to discretionary expenses (wants) such as entertainment, dining out, or shopping. Remember, the key to a successful budget is balance. It's essential to strike a balance between meeting your financial goals and enjoying your life, so be realistic and flexible when allocating funds to these categories.


The 50/30/20 rule was popularized by Elizabeth Warren and says you should split your after-tax income into three:

  • 50% on needs
  • 30% on wants
  • 20% on savings

The simplicity of this rule makes it easy to remember and follow with your personal finances.


Step 4: Implement the Envelope System (Optional)

The envelope system is an optional yet highly effective method for sticking to your budget. This method involves allocating cash for each expense category into separate envelopes. Once the money in an envelope is gone, you cannot spend any more in that category until the next month. This system forces you to be disciplined with your spending and can be especially helpful for those who struggle with impulse purchases.

For those of you who don’t use cash so often, you might consider other methods of categorizing your money. Revolut, for example, offers “Vaults” which are unique spaces you can create to divide your bank account into different areas.

Step 5: Monitor and Adjust Your Budget Regularly

Your budget should be a living, breathing document that adapts to your changing circumstances. It's essential to review and adjust your budget regularly, at least once a month, to ensure it remains accurate and effective. If you find that you consistently overspend in a particular category, consider reallocating funds from another area or identifying ways to reduce your spending.

Likewise, if you find that you consistently have a surplus in your budget, put that extra money to work by contributing to your savings or paying down debt. Remember that your financial goals may change over time, so be prepared to make adjustments to your budget as needed.

Step 6: Stay Accountable and Reward Yourself

Sticking to a budget can be challenging, but it's essential to stay accountable and keep your financial goals in mind. Share your budget plan with a trusted friend or family member who can help keep you on track and offer support when needed. Alternatively, consider joining a budgeting group or online community where you can share tips, challenges, and successes with others working towards similar financial objectives.

Finally, don't forget to reward yourself for your progress. Celebrate small victories along the way, such as paying off a credit card or reaching a savings milestone. These rewards don't have to be extravagant – a simple treat or a night out can be a great way to acknowledge your hard work and dedication to your budget. Just be sure that your rewards align with your budget plan and don't sabotage your financial goals.


Creating a personal budget plan you can actually stick to is an essential step towards achieving financial stability and independence. By carefully tracking your income and expenses, setting realistic financial goals, and making regular adjustments to your budget, you'll be well on your way to taking control of your finances.

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