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?

How to Create a Monthly Budget


Create a Budget

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?

Posted on, October 7, 2014
  • Subscribe to our email list to receive a FREE video outlining my top 5 tips for saving money on groceries.
  • Your e-mail address
Comments
  1. amber says:

    I love your site. I’ve been budgeting for the first time over the last 3 months. I would consider it partial budgeting really just tallying income and then bills and figuring out what the leftover money is. Now that I’ve gotten used to that I can start throwing groceries and expenses in. I love the receipt basket idea and will start doing that. I will also make my spouse sit down with me and go over this, sometimes I feel he doesn’t understand the value of a dollar lol.
    Hopefully we can save enough to buy a computer and printer soon, then my couponing can really go to town! But we are expecting twins and have a blended family with 3 kids already so who knows when that will be possible! Any coupons for PC’s let me know!! :)
    Thanks for the great tips!!!

    -family of (to be) 7

  2. teachermum says:

    Cassie, you already know we are on the same page with this one. I think these types of articles that you write are the most important ones on your website! Saving money with coupons makes absolutely no sense if you are just digging the debt hole deeper every month buying making other purchases you can’t afford.

    Perhaps a “spending plan” sounds better to some folk–seems budget is a 4 letter word to some people…

  3. Mrs January says:

    amber – I used to budget that way as well, until I realized that I wasn’t paying important “bills” such as RRSP contributions and funding our emergency fund. Make sure you you have savings part of your budget! :)

    teachermum – I’m glad you think so! I will try to write more of them. :)

  4. Ash says:

    Mrsjanuary just wondering if you were going to start postin your budget again like you use to!

  5. Ashley says:

    Great article! I think having a budget is VERY important. A few years ago, when DH (DBF at the time) were living in our first apartment together and finishing up college, we had no budget and overspent every month by ridiculous amounts! Once I finished college and got a full-time job, I realized that our overspending had caused us to rack up a huge amount on our credit card. We created a budget after that, and try really hard to stick to it and have been paying down our debt since then. Having a budget helps you keep your finances in control, and not accumulate anymore debt. For the lazy budgeters (like myself), mint.com is amazing for tracking your budget! It automatically totals everything and pulls in all your transactions from your bank account. I love it, makes my life so much easier :)

  6. wendy says:

    I just wanted to tell you that your web site has helped me a whole lot. Please continue. In the last 3 weeks I have decreased my grocery bill by $410 by watching the fliers and using coupons. Oh ya, I also organized my house so I know what I need to buy and what I don’t.

    Right now I am still trying to figure out best prices in different stores. This is a slow process, but I am getting there. I know some people say that going to different stores to shop uses too much gas and time. I am fortunate that I have all stores in a close radius and I make my trips when I am out doing other things like dropping kids off at activities. So far it has worked for me. Still in the early stages.

    Thanks again!!

  7. jess says:

    we suck at budgeting, we always go above our budget – especially when it comes to groceries. i think it’s because we buy organic, fresh fruits, veggies and they only last for like 5-7 days and we have to shop like once a week for it.

    also, crazy expenses come up. we almost had our credit card paid off, then my vehicle needed a 45,000 mile service – which costed $279.00, which we had to put back on the credit card. we will get that dang thing paid off eventually.

    we are to the point though, we pour our money into savings, toward my hub’s truck payment, paying bills, that we don’t have the extra cash left over to actually DO STUFF with.

    i’d be interested in seeing your budget, as for food,gas, hobbies, etc. do you use a spreadsheet, do you manually write it down?

  8. Mrs January says:

    Hey Jess! – We have a spreadsheet that hubby made at the end of 2010. It tracks my coupon savings, rewards program earnings and then of course, our expenses. I used to do it manually but found that it was WAY too much work.

  9. tracy says:

    Thanks for all the advice i love using coupons and saved alot so far!If only the tellers werent so anal and understand that a purchase in the dictionary is one thing which would be one item!thanks i have always kept a budget too!

  10. Suzanne says:

    The biggest problem for us is actually sticking to a budget. HELP! :)

  11. Samantha Rosenthal says:

    I am a military wife and when my husband went overseas a few years ago I tried the Magic Jars. I created a budget and lived on cash for 5 months. I paid off my husband’s roughly 8,000 dollar debt during this time without using any of the money he made from his tour. Unfortunately I felt guilty making him live on budget when he came home so I quit and we never used any of his tour money to pay off my debt now 3 years later I still have this debt.

    However, I have final said enough is enough. I told my husband he needs to be more active in the finances and he has agreed to. So we actually sat down last week together and created a budget that works. We discussed plans to actively pay off all my debt around $10,000.

    I love the tips you provide all over your website and I have been actively reading all your articles. I just wanted to tell you and the others out there that it is possible to get your husband involved and I have to say he actually is feeling a bit satisfied by helping.

    Thank you so much for your great articles and advice. Please keep posting, as your my new favorite person to read.

  12. me says:

    why does the pic have a section called blow?

  13. 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.

Leave a Comment

(required)

This post may contain affiliate links. Read our disclosure policy (here).