Author: Nalo Hood
Having a budget is one of the best things you can do to improve your personal finances. However, inconsistent income and growing expenses can make it difficult to create a perfect monthly budget. To make monthly budgeting easier for you, we created this guide to cover the steps involved. Keep reading to find out.
How to Create a Monthly Budget: A Step-by-Step Guide
In simple terms, a budget is a plan for how to spend money. And below are the steps to help you make a monthly budget:
Budget Around your Goals
A wise person once said that the ancestor of action is thought. Without proper planning, you might struggle to take the right action, or budget the right way.
Planning your monthly budget is essential for long-term goals like saving for retirement, buying a house, or paying your children’s school fees. Also, short-term goals such as upgrading the computer you use for work, should not be taken with levity.
To accelerate your short and long-term goals, you should start budgeting. Without planning your income, you may ignore the important aspects of your future that require you to start saving and investing.
Calculate your Monthly Income
Before starting a monthly budget, you should calculate how much money you make within a month. If you are a salary earner, you need to calculate your monthly income after you minus your taxes (also add income from other sources).
If you are retired and already living on a budget but need to adjust, then calculate how much you have to spend monthly.
Your budget should ideally be lower than your monthly income to ensure there is some money to save by the end of the month. Furthermore, remember that your budget should consider months where your income is inconsistent or expenses increase.
Track and Deduct your Expenses
The next step in making a monthly budget is to record all your expenses and stay within your means.
Some monthly expenses like car repayment fees may be fixed, while others like food and transportation may vary from month to month. Nevertheless, it is important to keep everything you spend on budget, even if it’s not a frequent expense.
Once you deduct your expenses, the best thing is to keep the remaining money in your savings, investments, or emergency fund instead of adding it to the next month’s budget.
Design your Budget and adjust when necessary
Once you have a clear picture of your earnings and expenses, you can easily create a monthly budget with your goals in mind. As time passes, your income may fluctuate, and expenses increase. During this inflation time, you should consider adjusting your monthly budget to fit your current financial situation.
Final Thoughts
A budget is simply a plan to spend and manage your money properly. Creating a budget allows you to save more while making the best use of your money. If you need help creating a perfect budget, you should consider studying the tips discussed above.