monthly budget

How Do I Create A Monthly Budget?

monthly budget

A monthly budget accounts for the money that goes in and out of your financial accounts over the course of one month.

(If you want to plan for everyone in your household, create a family budget .)

A budget is an essential tool to keep in check your hard earned dollars. It helps you identify trends that you didn’t see while tracking your spending habits.

Over the course of 30 days, you’ll likely get paid once or twice, buy groceries, purchase clothes and make a payment toward your mortgage.

The identification a pattern of behavior and acceptance of the change are essential to identifying it as a behavior.

The budget is simply the number that shows the amount of money coming in.

How to make a monthly budget: If you’re making a monthly budget, here are some keys that you should follow.

While few people would say they actually enjoy budgeting , that doesn’t make the task any less important. 

Knowing how much money you make and having a plan for where and how to spend it is important if you want to make sure you cover essential expenses and have money left to save at the end of every month.

Monthly budgets are popular because many recurring expenses, like utilities, mortgage, credit card payments, child support, child care and other loan payments occur on a monthly basis.

The bad news is, you can’t create a monthly budget and leave it alone. 

Like a sloth hanging from a tree limb, it’ll do nothing for you. 

The good news is, we’ve got the secret to staying on top of your budget. 

Track Your Expenses

When you buy something, when you pay a bill, when you spend money at all . . . you need to put those expenses in your budget.

Calculate your monthly income

The first step when building a monthly budget is to determine how much money you make each month.

Income is any money you plan to get during that month—that means your normal paychecks and any extra money coming your way through a side hustle , garage sale, freelance work and the like.

For instance, your wants category may include your recurring music subscription, the movie tickets you buy and other things that fall outside of needs or savings/debt repayment. 

For a detailed list of possible budget categories, check out our list of monthly expenses.

While you can easily track your monthly spending habits by hand using pen and paper, there are several budgeting apps and software programs that make this process easier.

 One popular budgeting app is YNAB, (You Need A Budget) which is my favorite, because it is accessible and free.

Even the most frugal among us use money on some miscellaneous items. 

The bare bones expenses in this category include toothpaste and soap, clothes, laundry and school supplies for kids. 

If you have more wiggle room in your budget you can allocate funds to other expenses, like entertainment and gifts, travel or meals out.

Budget Planner

YNAB recommends a budget based on the information you provide, but you also have the option of customizing it.

It’s important to make sure the budget you build doesn’t involve spending more money than you make, as that will mean going into debt in the long term.

When calculating your monthly income, look at consistent sources of income.

Make sure you calculate your income using your net income , also known as your “take-home pay.” 

This is the money you have left over after payroll deductions. 

Net income is the money you earn that you can actually pay bills, spending on necessities, save and more.

Estimate your monthly grocery and supply expenses and enter that number on this line

If you’re not sure how much to include, add up all your grocery store bills from the last 3 months and divide by 3.

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Benefits of a budget calculator

That should give you a solid estimate. Enter that number into the monthly budget calculator.

A budget calculator will do the math so you don’t have to divide dollars and cents.

Each expense should only be captured once in the budget calculator.

Repairs/Maintenance: Most renters don’t need to pay for repairs and maintenance on their rental property.

If that applies to you, leave this section blank. If you’re a homeowner, or a renter who’s responsible for your own maintenance and repairs, this can be a difficult amount to estimate.

If the last 3 months were higher or lower than usual, consider averaging your bills over the last 12 months instead. 

Entertainment: Take a moment to consider all your regular entertainment expenses. That includes everything from dinners at your favorite restaurant to Netflix.

Calculate Your Income After deciding on a budgeting strategy , the next step is to determine your monthly income.

“If you work for an employer as a W-2 employee, they will take care of all of the tax withholding, so you can use your after-tax income amount to create your budget.”

Remember: When you create a monthly budget, you tell your money where to go so you’re never again left wondering where it went.

You can create your budget in a spreadsheet, on a piece of paper, or the best way—with EveryDollar.

Budget Step : Enter Your Income The first step to create your monthly budget is simple: Enter your income.

There are very few strict rules when it comes to budgeting so long as you wind up spending money in a way that makes you happy and helps you reach your financial goals. 

The only truly important rule is that you budget spending less than you earn each month.

 Spending more than you make will lead to debt in the long term and prevent you from achieving financial security.

If you have high-interest debt, you may want to consider flipping the wants and savings portions of your budget. 

When those high-interest debts are dragging you down, it’s impossible to make any progress on your other financial goals.

Post: 6 Ways Yo Travel On A Budget

Food

American households paying a small percentage of their income to buy food.

 According to the USDA, the average American earns about $ 1.3 billion compared to the average American’s. 

Our food costs are also lower compared to that in the United Arab Emirates.

 The food network, the food pictures that are posted through social media, as well as the popularity of the food ’em is a trend that is causing us to spend comparatively less of our paychecks. 

In addition we spend more on food outside the home which can affect peoples budgets.

Budgeting for your future

Once a good budget is available, you will be surprised at how valuable this is in the future. 

You can also use emergency funds or retirement savings to invest. For another you will have more money for that as needed. 

Tell me about the fact that you spend huge amounts of time eating or travelling to other places or clothing. 

Depending upon your money, pay your bills, and pay yourself, do it yourself. 

Can you imagine that things might change over time? 

Say you want to re-locate in the future to get better pay. Check out the budget and see where your budget will go.

By planning ahead for large (and even unexpected) expenses, you’ll have the money you need no matter what comes up in life, without resorting to expensive credit cards and personal loans.

The 50/30/20 Rule

In the case of budgeting, the simpler the more it seems you have less confidence in complex budgeting processes. 

Among many budgeting strategies is the 50/ 30/20 rule which divides your expenditure by category and is used to calculate the amount of money needed to pay off a debt. 

50% of your earnings will go toward necessary expenses. 

These include housing, utilities, car payments, groceries, petrol minimum payments, monthly insurance premiums, and other. 

And ideally, the 30% will be used for your housing costs.

Housing

The average American rent currently represents 32% of the median American income.

 Hundreds of millions of people have been rent subsidized and some are already on the brink of becoming rent subsidized. 

Our Budget Calculator shows how much money people like yourself can spend on their home. 

If the percentage of housing costs is below 30, the numbers indicate your neighborhood is struggling to meet housing costs. 

Your house price may include your house and mortgage repair.

Household Budget Basics

Budgeting allows you to manage how much you spend and how much you earn. 

Budgeting helps you see what you spend on different types of items.

 It has two main functions: This is the best way to get around the budget.

 Second, having a budget gives you more confidence about changing your lifestyle. 

Let’s go through life to the fullest. 

Each dollar that you earn should be included into your monthly budget.

This might look like living paycheck-to-paycheck. 

But it lives well.

Savings

It can help you calculate your retirement savings each year.

 Budget calculators tells you the typical person like yourself who has a savings budget for a home. 

The savings rate in the United States is notoriously poor. 

This calculator shows you how much money you have saved for the future and shows how interest on your account affects it.

Childcare

Whether or not a bundle of joy is dependent on your family, you will need a reasonable amount of money. 

It varies according to how many years of age the child has.

 Are there people who care for their children at home who pay for their care?

 Is Private School a Better Option? 

The Budget Calculator displays a list of the costs for children of a similar age.

Medical

You probably heard about increasing costs for medical care. 

Unless a doctor covers all the premiums on their insurance plan you will likely not get any medical expenses in one year. 

Meeting deductibles is a necessity for budgets. Plan medical expenses for the budget.

Transportation

Only one in 20 Americans commutes to work by public transportation. 

A few walk or bike, but most of the rest of us take a car. That means paying for repairs, car insurance and gas.

 Depending on where you live you may also have to pay for tolls and parking. 

Transportation is a budget pain point for many Americans because it’s so closely related to job security. 

If you have an unreliable car you likely can’t be a reliable employee.

Track Spending Process

Don’t forget to budget for expenses that may occur annually instead of monthly. 

You should account for expenditures such as property taxes, car insurance payments , doctor or veterinary visits and vacation costs. 

You may also want to include a factor for unplanned expenditures such as car repairs or home repairs. 

Think about your financial priorities 

Once you’ve spent time tracking your spending, it’s time to sit down and look at your spending history and how it aligns with your financial priorities. 

Everyone has expenses they can’t avoid, such as rent, food and bills.

Because expenses vary from month to month, some hardcore budget devotees will make a new spending plan each month. 

For example, you could budget for gifts in December and for travel in the summer. 

Others average the cost of all gifts and travel for the year and divide it by 12 months.

Emergency fund 

Let’s talk about living within your means.

 Ideally, every dollar of your income should be accounted for in a monthly budget. 

That may sound like living paycheck to paycheck and in a way it is. 

But it’s living from paycheck to paycheck in a good way.

 You “pay yourself” by beefing up your emergency fund and investing for retirement, you pay your bills (including any debts you’re carrying) and then you can use what’s left over.

 Having a budget that you regularly reassess will help you take stock of where your money is going and how close you are to meeting your goals.

Once you’ve taken the time to think about your priorities and how they align with your spending habits, you can sit down and plan your future spending. 

It’s smart to pay yourself first . One of the first things you should put in your budget is savings , whether it be for an emergency fund , a new car, a down payment on a home or other purposes. 

Follow the advice of investment icon Warren Buffett , who said: “Do not save what is left after spending, but spend what is left after saving.”

Different Categories And Cost

Whether your employer helps cover your health insurance premiums or you cover that expense on your own, you probably don’t go a year without incurring some medical expense. 

Meeting even a relatively low deductible can still eat into your budget. 

That’s why it’s a good idea to plan a certain amount of medical cost into your budget.

Consider starting a daily log of your cost of living to see what you’re really spending your money on. 

Often, those small costs, like running out for coffee or grabbing a snack on your way home from work, can be overlooked, so it’s best to keep track of them in the moment.

Conclusion: 

If you’ve got debt, you shouldn’t be piling money into an entertainment or restaurant budget line. 

You need to cut back on all the extras until you’ve kicked debt out of your life. 

Forever. Why? 

Debt steals this month’s income to cover something in the past. 

It’s like taking two steps forward with your money only to be yanked back again. 

Get rid of the debt 

Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content. 

Enabling you to conduct research and compare information for free – so that you can make financial decisions with confidence.

Free Monthly Budget Planner
Take control of your finances with our Monthly Budget Planner, a free downloadable PDF. This user-friendly tool empowers you to track income, expenses, and savings goals, ensuring you stay on top of your financial game every month.