Creating a Realistic Budget: Key Steps for Financial Freedom in 2025

How to Create a Budget that Work, Creating a Realistic Budget: (Key Steps for Financial Freedom 2024-25 )

Welcome to Pennywise Planner, where we make personal finance simple! Where we will provide you with a detailed explanation of how to come up with a realistic budget. This is imperative for beginners or those intent on improving their financial plan. You’ll be able to manage your personal finances better with this guide. So let’s start this journey!

Understanding your income is the first step in establishing a realistic budget.

While it may seem self-evident, it is very important to know the realistic amount of money you earn every month. Begin by listing all of your income sources. This should cover your salary, freelance jobs, Gigs or any other cash inflows that happen on a regular basis like side hustles among others. In case of unstable earnings per month for example if you are a freelancer or commission-based employee; find an average from the past three to six months to determine how much money you actually have.

When calculating total earnings, you have arrived at the next stage of realistic budgeting.

At this point in time, once you have known and established how to get your earnings from various Sources, now it is time to sort out where each penny goes. To come up with a good plan, always keep track of what goes out.

Start by categorizing your spending patterns into fixed expenses like rent, utilities and loan repayments as well as variable ones such as groceries, entertainment and dining out. Today’s video will provide you with a detailed explanation of how to come up with a practical budget. This is imperative for beginners or those intent on improving their personal financial plan. You’ll be able to manage your finances better with this guide. 

Monthly Income	Amount	Fixed Expenses	Amount	Variable Expenses	Amount
Salary	60000	Rent/Mortgage	10000	Groceries	5000
Side hustles	20000	Utilities	1000	Dining Out	3000
Total Income	80000	Internet/Cable	1000	Transportation	2000
		Phone Bill	500	Entertainment	1000
		Others	500	Leisure	500
		Total Fixed Expenses	13000	Miscellaneous	1000
				Total Variable Expenses	12500

Savings & Investment	Amount	Debt Payments	Amount
Emergency Fund	3000	Any Loan	2000
Retirement Fund	5000	Credit Card 1	1000
Other Fund	2000	Credit Card 2	1000
Total Savings	10000	Other Debt	500
		Total Debt Payments	4500

You can use a spreadsheet, a budgeting app, or a pen and paper – whatever is best for you. The point is to know the details of every dollar you spend for at least 30 days so that you can understand what exactly your spending habits are. And trust me; little little things do account!

Now that we know how much money comes into our hands, let’s look at our financial goals. With clear goals in mind, you will be able to priorities your expenditures and ensure that your money works for you.

Summary	Amount
Total Income	80000
Total Savings	10000
Total Expenses	25500
Total Debt Payments	4500
Net Savings	40000

Think about what you want to achieve financially; do you want personal debt settlement? or do you earn for vacation stashing? should it include building an emergency fund? These should all get documentation and also give them a timeframe and amount of cash too.

To adhere to your budget, it is important that you keep in mind these objectives because they provide you with reasons when needed.

The next step is creating a realistic budget with our knowledge of incomes, expenditures, as well as aspirations.

This is where the magic happens! Subtract your total expenses from the total income first. If our earning power is less than the amount we are spending then reduce some of those expenditures. More often than not this will be in regard to going out meals, subscriptions or engaging in impulsive buying habits.

If you have surplus cash, good! You could channel that additional money towards your financial ambitions. The trick is to even the figures so that every dime is explained. This is often referred to as a zero-based budget where income minus expenses is zero.

Do not worry if it takes some attempts before getting it right. Budgets are not rigid; they should be flexible and open for adjustments at any time.

 The last step in realistic budgeting is periodical review of your budget plan.

At least once within one month would do in my view. Monitor your expenditure, contrast it with your budget plans then figure out the places you need to make changes.

The ultimate thing to do is regular budget evaluation for yourself. In my opinion this should happen once monthly at least. Check how much you spent as opposed to what was set aside and see what areas you may want to change.

Conclusion 

So folks there you go, let’s create a functional financial plan from scratch! Always remember that making a financial plan is an art. This means it’s going be fun to master it through repetition . Do not worry too much about it being difficult at first – just hang on there and you will benefit soon enough.

Also Read. 

10 Game-Changing Ways to Escape the Middle-Class Trap and Attain Financial Freedom

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