A budget is a plan for spending wisely. It’s the amount of money you have left after you pay your bills, buy food and clothes, and put gas in your car. If this sounds like something that interests you, keep reading for some tips on how to make a monthly budget.
A monthly budget can help you manage your finances by making sure that there are enough funds to cover all of these expenses each month without going into debt or running out of cash before the end of the month. Creating a monthly budget will allow you to feel more confident about meeting your financial goals because it will show what is coming in (income) and what is going out (expenses).
What is a Monthly Budget?
“You might not know what a monthly budget is, or how to make one. That’s okay! I’m here to help you out with all of that. A monthly budget is just an estimate of how much money you’ll need for the month ahead.”
“I’ve made a list below of some things that are essential in every household and also have estimated costs so you can see what it will cost when making your own monthly budget.”
- Essential items: Food, Rent/Mortgage, Utilities (electricity, water, gas), Internet Access
- Estimated Costs: $150-$200 per month for food depending on if there are two people living in the house; $700-$900 per month for rent etc.
How to Make a Monthly Budget?
This is a guide to make your monthly budget. If you’re married, this will be different than if you are single because of the differences in income and expenses.
There are two steps:
Step 1 – Make a list of all your income sources (salary, side jobs, money from investments) and find out how much money you have coming in each month after taxes.
Step 2 – Use that amount to figure out what percentage goes towards rent or mortgage payment (typically 30%-50% depending on the cost of living), utilities (typically 10%), groceries and household items (typically 20%-30%), clothes/shoes/toiletries (typically 5%) etcetera.
Then create a spreadsheet with these percentages for each category so it’s easier to track and calculate.
Here are some additional tips for creating a monthly budget that will make your money work harder for you.
Start by calculating how much you spend every month on necessities like food, gas, and rent/mortgage. It can be helpful to categorize these expenses into “fixed” or “variable” categories depending on whether they stay relatively the same amount from month-to-month or not.
Fixed expenses might include things like your mortgage (or rent), while variable ones might include groceries and gas. Once you have a total of those figures, divide it by 12 to get an average cost per week of each category.
Have you heard of 50/30/20 budget?
It’s a way to manage your money by setting three clear goals for what it is that you want out of your paycheck.
The 50/30/20 budget is a great budgeting method to manage your money. It doesn’t matter what age you are, this system will work and help you gain control of your finances. This budget can be customized for each individual’s needs with their income level in mind.
Whether it’s $50,000 or $5,000 per year, there is an option for everyone! The best part about the system is that it takes into account all aspects of spending: housing costs (rent or mortgage), food costs (groceries and dining out), transportation costs (car expenses) and other miscellaneous fees such as entertainment (going to the movies).
With these categories covered, we now know how much we need to allocate towards our goals.
Keep track of your expenses
Staying on top of your finances is the key to a happy and successful life. One way to do this is by keeping an account of all your expenses. It’s not hard, it just takes a few minutes every day. If you are new to earning money or have never had a job before; I suggest starting with tracking your spending habits for a month; so that you can get used to saving and spending money wisely.
Once you’ve gotten into the habit, start recording what you’re buying and where from so that when the time comes for taxes (which is inevitable)you’ll be ready! This will also help if ever need proof of purchases in order to return something or make an insurance claim!
For most people, the best way to account for your expenses is to use a budgeting system that allows you to allocate money towards different categories: food, entertainment, rent, transportation. This will help you understand where your money is going and make sure nothing slips through the cracks.
If you’re just starting out on your own or are married with children; an even better idea may be to buy a book like “Dave Ramsey’s Total Money Makeover” which not only teaches personal finance but also provides exercises and support groups.