Creating a personal budget is one of the most effective ways to understand where your money goes — and how to take back control. The Federal Trade Commission emphasizes that budgeting helps you make smart decisions about what you can afford, how to handle unexpected expenses, and how to plan for financial goals like paying down debt or saving for the future. While the idea of budgeting can feel overwhelming at first, the process is simpler than it seems. A clear plan gives you a full picture of your income and expenses, so you can make intentional choices instead of reacting in the moment.
Budgeting puts you in the driver’s seat, giving you a practical way to balance today’s expenses with tomorrow’s plans. With a solid plan in place, you can decide how to allocate your money toward what matters most, including:
- Paying essential bills on time
- Taking a stress-free vacation
- Building an emergency fund
- Saving for a major goal, like college or a home
However, building a personal budget isn’t just about setting goals — it’s about understanding your current habits and financial obligations, too.
Know Where Your Money is Going
Many people spend small amounts day to day without even thinking about it. And those tiny, miscellaneous expenses can really add up — but budgeting isn’t just about tracking what you spend on meals or entertainment. It’s also about managing the larger financial obligations you carry.
Understanding those obligations helps you plan for monthly expenses, avoid overspending, and prioritize saving or paying down debt. Recent data from the U.S. Bureau of Economic Analysis shows that while personal income rose 0.4% in August 2025, consumer spending increased by 0.6% — meaning many Americans are spending slightly more than they earn. Even more striking, the personal-saving rate dropped to just 4.6%, which means people are saving less than five cents of every dollar after taxes. That kind of gap between income and expenses can quietly chip away at financial security.
A personal budget helps close that gap. It gives you the clarity to see where your money’s going — and the opportunity to realign your spending with your goals.
Here’s how to create a personal budget in 6 steps.
1) Gather your financial information
Start by collecting your financial information* — pay stubs, bank statements, receipts, and bills — so you can list out all of your expenses and income. Try to go back at least six months so you can make the most accurate predictions.
- Download the Stellar Bank Mobile App to view all your accounts in one place, check past transactions, download statements, and monitor your income and expenses in real time — all from your smartphone.
- Visit the Personal Online Banking page to securely access your accounts from any device, transfer funds, pay bills, and stay on top of your finances with ease.
*Try this budgeting worksheet from the FTC to help you organize your income and expenses.
2) List your income
Income is any money you have coming in each month, such as your normal paychecks or any extra money you earn. Be sure to calculate your budget based on your net income, not your gross income. You want to use the amount of money after taxes are taken out. If you have a regular income, it’s easy to just look at your pay stubs. If you have an irregular income, such as a small business owner or an independent contractor, you can review your net income from the last few months and calculate your budget based on the lowest amount. You can always make adjustments if your income changes later.
3) List your fixed and variable expenses
Begin by listing your fixed expenses such as rent, mortgage, insurance, student loans, car payments, or credit card payments. Next, list your variable expenses such as power, water, food, entertainment, and transportation. Be sure to record everything you spend, even if it seems minor. Your budget won’t be accurate if you’re not including every transaction.
4) Subtract your expenses from your income
While you’re calculating your budget, you may find that you have more expenses than income. This happens, but you can’t spend more than you make. Take some time to review all of your expenses and cut out anything extraneous. Be prepared to ask yourself some hard questions.
- Do you really need to eat out five times a week?
- Can you cut out any unnecessary subscriptions?
- If you’re down to your essential expenses, are there ways you could bring in additional income?
If you find you have money left after all of your bills and obligations, your budget surplus puts you in a great position. You can add extra money to your budget categories, put it toward your financial goals, or save it in an interest-bearing account like a Personal Savings Account.
5) Track your spending
There are many ways to track your spending, but the best way is the method that works for you. Whether you write down your spending in a notepad, create a spreadsheet, or sync your accounts to a budget tracker app, you’ll be able to see how much you’re spending in different categories and make any adjustments. Track your transactions on a regular basis, not just at the end of the month. If you take a look at your spending daily, or even at the end of the week, it’s much easier to keep yourself accountable and avoid overspending.
Regular tracking is also one of the easiest ways to spot suspicious activity. Unfamiliar charges or small withdrawals can be early signs of fraud — and the sooner you catch them, the better. Learn how to protect yourself at our Fraud Protection Resource Center.
6) Make a plan for the future
Now that you’ve set some initial goals, think ahead about how to reach them. For example, if you’re saving for a new car, calculate the down payment and monthly payments and how they’ll fit into your budget. Consider future variable expenses too, like vacations, holiday gifts, or unexpected repairs. To make the most of your savings strategy, connect with a local Stellar Bank banker who can guide you on the best accounts for your goals and stage of life — whether you’re nearing retirement, saving for your children’s future, or building an emergency fund. Explore Stellar Bank savings, money market, and CD options to see what works best for you.
Remember to review periodically
Once you’ve established your budget, it shouldn’t change much month-to-month. But it’s important to review it periodically to make sure you’re on track. Try to look at your income, spending, and savings at least every month so you can ensure your budget is still valid. For example, if you’ve started a side hustle, recently moved, or need to buy a new car, your budget will shift, and you’ll need to make some changes.
You can find more budgeting strategies, tips, and tools — including a budget calculator — at the Stellar Bank Financial Education Center.
