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  • How To Create A Monthly Budget

  • How To Create A Monthly Budget

    One of the best things you can do for your financial future is to create a monthly budget.

    There are a variety of excuses that people give for not having a budget. They don’t make enough money, they don’t have time, they don’t want to be told what to do with the income they bring in. The list goes on and on.

    The fact of the matter is that budgeting is necessary. And when used correctly,  a budget can actually be fun. If you were saving more and spending less, without affecting your quality of life, wouldn’t you be happier? Wouldn’t that make you excited?

    Having a monthly budget is the number one way to stay out of debt and save money. Without one, you may be setting yourself up for financial hardships in the future.

    Below are tips on how to create a monthly budget.

    Track your expenses and income

    You will want to track every single penny that you spend for at least one month (3-6 months is ideal). This includes groceries, gasoline, clothing and even those little purchases that really add up such as magazines, small toys for the kids and your daily coffee.

    Keep all of your receipts and put them in one spot in your home (we keep ours in a little basket on my desk). At the end of every week, go through your receipts and update your expense tracking sheet.

    Carry a notebook and record all expenses in there, as well. It doesn’t help to write “spent $50 at Walmart”. What did you spend that money on? Groceries? Clothing? Office supplies? Be very detailed when you write down what you are spending money on, so you are aware of what your money is being used for.

    You should also track what your monthly NET income is (the amount you take home after all expenses, such as taxes) for at least 1 month. If your income fluctuates, a minimum of 3 months is required. Add all 3 months together and divide by 3 to determine your average monthly income.

    At the end of the month, subtract your expenses from your income. Do you have a positive number? If so, good for you! If you have a negative number, this means that you are living above your means and are digging yourself into a big giant debt hole. Time to tighten that money belt!

    Make a list of your expenses

    Now that you know how much you are spending, you need to come up with a realistic monthly budget.

    If you have been spending more than you make, you will need to do some cutting back or work on increasing your income.

    Separate your variable expenses (groceries, clothing, entertainment) from your fixed expenses (mortgage, car payment, school loans) to see where you can cut back, if necessary.

    Write down all of the expenses that you plan to include in your monthly budget.

    Don’t forget to include expenses that only come up every few months or even once a year (such as birthday and Christmas gifts, oil changes and hair cuts).

    Incorporate your financial goals

    Do you hope to own a home in 3 years? You’ll need to start saving more. Maybe you want to be debt free in the next year. You may need to increase your income to pay it off. Whatever your goals may be, incorporate them into your budget.

    Goals are best achieved when they have a plan attached to them. If you don’t have a plan for achieving your goal, it’s just a dream.

    Have a monthly budget check-up

    At the end of every month, tally up everything you spent for each line item in your budget, making sure you did not spend more than you made.

    If you have a spouse, it’s important that you both look over the budget every month so that each of you knows what is going on with your finances.

    Budgets do not have to be boring and self restricting. They are simply a way to keep your spending in check.

    Don’t get discouraged and throw in the towel if you go over budget one month. Try harder the next month and you will see that over time, living by a budget is really quite easy. The more you do it, the more it becomes second nature.

    Do you have a monthly budget?

    photo credit

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    19 Responses to »
    How To Create A Monthly Budget

    1. Cassandra says:

      Sure do, necessary as a single mom on government assistance. I finally got in to low income housing which has loosened the purse strings a wee bit and given me some more flexibility.

    2. me says:

      why does the pic have a section called blow?

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