How to Make a Monthly Budget: Let’s be honest, creating a budget doesn’t sound like the most exciting way to spend time. But the truth is that a monthly budget is your best friend when it comes to taking control of your money. Whether you’re saving for a great vacation, paying off debt, or just trying to avoid those “where did all my money go?” moments, a solid budget is key.
The good news? Creating a monthly budget isn’t as difficult as it seems. You don’t need fancy spreadsheets or a finance degree — just a little time and honesty about your spending. Let’s break it down step by step in a way that actually makes sense.
(How to Make a Monthly Budget)
Step 1: Know your income (how much money you actually have)
Before you can plan where your money goes, you need to know how much money is coming in. Your monthly income includes:
- Your salary (after taxes – this is your takehome pay)
- Side gigs or freelance work
- Any passive income (rental properties, dividends, etc.)
- Government benefits (if applicable)
Pro tip: If your income changes every month (like if you’re a freelancer), average your last 36 months of income to get a realistic number.
Step 2: Track your expenses (where is your money going?)
This is where most people get stuck. You may think you know where your money goes, but unless you track it, surprises lurk everywhere.
Fixed Expenses (Mandatory Payments)
These stay the same (or close to it) every month:
- Rent/mortgage
- Car payments
- Insurance (health, car, home)
- Subscriptions (Netflix, gym, etc.)
- Loan payments (student loans, credit cards)
Variable Expenses (Flexible ones)
These changes are based on usage or choices:
- Groceries
- Gas
- Eating out
- Entertainment
- Shopping
How to track them:
- Look at bank/credit card statements from the last 13 months.
- Use an app like Mint, YNAB (You Need a Budget), or even a simple spreadsheet.
Step 3: Set Financial Goals (Why are you budgeting?)
Monthly budgeting works best when you have a clear purpose. Ask yourself:
- Short-term goals: save for a vacation, pay off credit cards, build an emergency fund.
- Long-term goals: buy a house, retire early, invest for the future.
When you’re tempted to overspend, having goals keeps you motivated.
Step 4: Choose a budgeting method (pick what works for you)
Not all budgets are the same. Try one of these popular methods:
1. The 50/30/20 Rule
50% needs (rent, groceries, bills)
30% wants (eating out, hobbies, shopping)
20% savings/debt (emergency fund, retirement, pay down debt)
Best for: People who want a simple, flexible approach.
2. Zero-based budgeting
Every dollar has a job to do; subtracting expenses from income leaves zero. If you have $200 left after bills, spend it on savings, debt, or fun.
Best for: People who want total control over every dollar.
3. The Envelope System
Use cash for spending categories (groceries, entertainment). When the envelope is empty, you stop spending.
Best for: People who overspend with a card.
Step 5: Adjust and cut (where can you save?)
Now, compare your income to your expenses. If you’re spending more than you’re earning, it’s time to cut back on your savings.
Easy ways to cut costs:
- Cancel unused subscriptions (do you really need three streaming services?)
- Cook more meals at home (cooking saves money)
- Shop with a list (avoid impulse buying)
- Negotiate bills (call internet/cell providers for better rates)
Remember: small changes add up quickly!
Step 6: Automate what you can (make it easy)
Humans forget things. Machines don’t. Set up:
- Auto-pay of bills (avoid late payments)
- Auto-transfers to savings (pay yourself first!)
This way, you won’t accidentally spend money that’s meant for savings.
Step 7: Review and adjust (because anything can happen in life)
Your first monthly budget won’t be perfect – and that’s okay! At the end of each month:
✅ Check your spending (did you stick to the plan?)
✅ Adjust categories (maybe you underestimated groceries)
✅ Celebrate wins (paid off debt? saved extra? Give yourself a high-five!)
Final tips for budgeting success
- Start small – don’t completely change your life overnight.
- Be realistic – If you like coffee, budget for it instead of eliminating it completely.
- Use tools – Apps like Mint or EveryDollar make tracking easy.
- Be patient – Building good money habits takes time.
Conclusion: A monthly budget isn’t about limiting yourself; it’s about making your money work for you. When you know where every dollar goes, you’ll feel more confident, less stressed, and more in control. So grab a notebook, open a spreadsheet, or pop open a budgeting app and give it a try. Your future self will thank you!
FAQs. About Make a Monthly Budget
- Why do I need a monthly budget?
A monthly budget helps you track your income and expenses so you don’t overspend, save more and reach financial goals. Without it, it’s not easy to figure out where your money goes, which can lead to debt or missed savings opportunities.
2. How much should I save each month?
The 20% savings rule (from the 50/30/20 method) is a good rule of thumb, but it depends on your goals. If you’re paying off high-interest debt, you might want to prioritize that first. Saving 510% is also a great start!
3. What if my income changes every month?
If your income isn’t stable (like a freelancer or gig worker), base your budget on your lowest expected monthly income from the past year. Save extra in the good months to cover the slow months.
4. How can I stick to my budget when unexpected expenses come up?
This is why an emergency fund is important! Aim for 36 months of living expenses. If an unexpected expense comes up (car repairs, medical bills), adjust your budget by cutting back in other areas.
5. What’s the easiest way to track my spending?
Budgeting apps like Mint, YNAB (You Need a Budget), or PocketGuard sync with your bank accounts and categorize expenses automatically. If you prefer manual tracking, a simple spreadsheet works too!
