How To Make A Monthly Budget You Can Easily Stick To – 6 Simple Steps
Want to know how to make a monthly budget without feeling overwhelmed? Here are 6 insanely easy steps you can take to create a budget and stick to it.
Let’s be real; budgeting can seem like such a complicated task that requires people to be good with numbers. Or like it restricts you from spending your money on the things you like.
The truth is making a monthly budget is SUPER easy, doesn’t require you to be good with numbers, and it most definitely gives you more freedom on how you can spend your money.
So if you want to know how to make a monthly budget, you’re in the right place.
You’re going to learn how to create a budget in simple steps, how to budget monthly, how to budget money on low income, how to budget for beginners and how to make a budget plan you can stick to.
Creating a budget helps you take charge of your finances, and it enables you to be in control of where your money goes.
Making a monthly budget is also essential if you want to achieve financial goals like saving more money, paying off debt, building an emergency fund, etc.
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After reading this post, you will be a pro, and extra prepared to create a monthly budget plan you can easily keep up with without feeling stressed out or restricted. But first things first…
What Is a Monthly Budget?
A monthly budget is a plan for how you will spend your money each month.
If you don’t like the idea of budgeting, you need to understand this first. A monthly budget is not a restriction on how to spend your money
Instead, it helps you take total control of how you will spend every dollar by allowing you to plan for expenses before they occur.
So if you’ve been thinking about budgets in a negative way, understand that budgeting gives you the freedom to spend money on the things you care about.
There are many budgeting methods out there, but in this post, we are going to focus on zero-based budgeting, which in my opinion, is the best budgeting method.
What Is a Zero-Based Budget?
A zero-based budget means that every dollar coming in every month has a function. This means that your monthly income less your monthly expenses equals zero. If you’re thinking that this is not a good thing, stay with me for a moment.
Creating a zero-based budget doesn’t mean that you will spend all your money on monthly expenses or that you will end up with zero money in your bank account.
What this means is that you will assign a certain amount of your monthly income towards expenses as well as other important money goals like saving, paying off debt, etc.
There are many budgeting apps and tools out there, but you can also use a simple notebook, pen, and calculator to make your monthly budget.
This post is about how to make a monthly budget you can stick to without feeling restricted or overwhelmed.
HOW TO MAKE A MONTHLY BUDGET
1. Identify Your Monthly Income
The first thing you should do when making a monthly budget is write down your monthly income. For this step, make sure that you include all your sources of income.
If you’re on a salary, write down your monthly income after taxes and insurance have been deducted.
On the other hand, if your monthly income changes from month to month, try your best to estimate how much you will be making for that month. You can always make changes later on if need be.
For this step, avoid including inconsistent sources of income like selling an old piece of furniture, for example.
So the first step for making a monthly budget is writing down your monthly income. Pretty simple, right?!
2. List Down Your Fixed Monthly Expenses First
Your fixed expenses are expenses that do not change from month to month and are always due. Think of rent, or mortgage payments, car loan payments, internet service, utilities, phone service, student loan payments, etc.
If you know what the amount is for each of your fixed expenses, list them down with their respective amounts like this:
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Rent: $1500
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Phone Service: $80
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Student loan payment: $400
If you’re unsure what the amount is for certain fixed expenses, go through your bill from the past 3 months, and write down the average.
3. Write Down Variable Expenses You May Be Expecting
For this next step, focus on those expenses that recur monthly but whose amount changes from time to time.
This can include essential expenses like food as well as other things you don’t really need but that you would like to budget for.
Variable expenses vary from person to person, but some common examples are groceries, gas, clothing, dining out, etc.
Because you probably won’t have a fixed amount for these expenses, you will have to estimate how much you’re expecting to spend on each one of them.
That is why I recommend spending a few months tracking how much you spend on these expenses.
You can also go through your bill from the past 3 – 6 months to understand how much you usually spend on recurring expenses whose amount keeps changing.
4. Think About Your Financial Goals
Another important step you should take before finalizing your budget is thinking about your financial priorities and goals.
Maybe you want to save more money, or you wish to pay off your credit card debt. Instead of ONLY thinking about your expenses, identify how much you want to put towards your financial goals, then write that down too.
This is also important because it will help you prioritize where your money goes instead of wasting it on less important things.
Here are some examples of financial goals to include in the budget:
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Investing 10% of your monthly income into retirement accounts
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Having at least 3 months of expenses in savings
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Paying off all debt as quickly as possible
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Saving for a down-payment on a house
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Saving for a new car
This step will also get you thinking about where you need to cut back to achieve your financial goals.
5. Subtract Total Expenses From Your Total Income
After writing down your total income, categorizing and writing down your expenses, go ahead and subtract your total monthly expenses from your total monthly income ( Total income – Total expenses).
Because we are making a zero-based budget, your income LESS expenses should equal zero because we have given every dollar a function.
So if you make $4500 every month, for example, it means that all $4500 is going towards paying bills, paying off debt, saving money, entertainment, etc.
And as I said before, this doesn’t mean that your checking account should have zero money in it. Always keep at least $200 in there for extra safety.
At this point, you have successfully made your monthly budget, but you’re not done yet!
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6. Track Your Transactions
The last step you should take if you want to make a monthly budget you can stick to is keeping track of your expenses.
Tracking your transactions throughout the month is very important. Otherwise, you will fail to follow your budget and to hold yourself accountable.
The good news is that you can easily do this with a free app like EveryDollar.
Doing this will help you know how you are doing, and it will protect you from overspending.
This post was about how to make a monthly budget you can easily stick to without feeling overwhelmed.
