How to Create a Monthly Budget


A budget is your action plan to understand your habits, track where your money goes and save. However, efficiently organizing a budget and using it may not be so clear-cut. Here we will look at how to set up a monthly budget.

App or paper?

Do you like writing things out on paper? Using an app that you can always have ready? Or maybe you prefer doing spreadsheets and graphs on your computer? The first step in creating your budget is to choose your medium. Pick a method that you find easy to use and that you will actually remember to use.

Determine your income to set your budget

In order to create a budget, you first need to know how much money you are working with. Make a list of all your sources of income. If your income is stable, you will have the same amount for each month of your budget. If it is variable, you will have to estimate your anticipated income. This can be done by looking at prior monthly incomes. The amount for your income should be what you receive in your paycheck after taxes. Add all your sources of income together to get your total income.

Identify your expenses

Now that you know how much money you will have, how will you be spending it? A great way to get a complete picture of your budget and spending is to divide your expenses into categories. There are two steps to this. 1) Many necessary categories are also fixed from month to month, such as rent, utilities and other bills. Note the amounts of each of those regular payments and subtract them from your total income. 2) Divide the amount that remains into your other expense categories: groceries, restaurants, transport, household products, etc. These categories may have varying amounts depending on the month and your spending habits. You can also have a “miscellaneous” or “other” category for extra expenses that pop up during the month.

Lastly, remember to count the money that you put in your savings account as an expense! Whether it is to pay off debt or save for a house, this category ensures you are putting a portion of your paycheck towards those goals.  

Get to zero

Zero isn’t a number we usually like to hear when talking about our money (unless it’s how much debt we have). However, in this case, it’s a good thing! A zero-based budget means subtracting all your expenses from your total income to reach zero (in the budget, not the bank). How does this help you? With this technique, you know where all your money is going, whether it’s groceries, hobbies, savings or paying off debt. You also know how much you have left after all your expenses, which brings us to… 

Track your spending

After you have created your budget for the month, you need to keep track of your actual expenses. Keep a small notepad with you, use your phone or collect receipts, then subtract your expenses from your budgeted amounts. Big purchases or small: record them all! Doing this daily will help you keep track of how much money is left in each category.

Make adjustments to your budget

After a couple of months, you will start to see your spending habits reflected in your budget. Perhaps you spend more in restaurants and less on clothing than you had originally anticipated. When you make your budget for the next month, take these observations into account and adjust your budget to reflect them. And of course, you can adjust your budget for a shorter or longer period of time.


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