How to Create a Monthly Budget

Educating yourself on the importance of budgeting your money will make a world of difference in the kind of life you lead.
by Updated March 2, 2010

Creating a monthly budget takes some hard work and patience to create, but can ultimately outline the rest of your life and how you are going to achieve the best quality of life possible. This information will help you to determine what your total amount of income is, what monthly expenses are incurred, and what you should potentially expect in the upcoming weeks/months/years.

Step One – Gather Your Financial Data

The first step to creating a monthly budget is to have proper documentation of all financial transactions as possible. Gather everything that you can dig up because it will all be useful in some way to your budget.

Step Two – Income

Record all sources of income, full time jobs and part time jobs, so that you know exactly how much money you are making in one month. It is very surprising to see people who don’t actually have any understanding of what they make versus how they spend.

Step Three – Expenses

Documenting all regular monthly expenses, such as cell phone, cable, or hydro bills is the next step into making your budget. Create a list of everything based on its priority to help put purchases in perspective. You are going to want to separate fixed expenses such as mortgage payments, insurance, utilities, and car payments which are things that you will need to pay every month and generally stay the same amount, from your variable expenses such as groceries, gasoline, and gifts. The variable expenses are where we are going to attempt to save money by lowering our budget limits.

Step Four – Tally up Everything

Once you’ve itemized and listed out all your expenses, deduct that amount from your total income for an idea of how much disposable income you have available each month. If you running a deficit, where your expenses are greater than your income, this is time for you to adjust your variable expenses to allow for more realistic amounts that fit into your actual budget.

Step Five – Review Monthly

Be sure to review your budget monthly by keeping your receipts and adding everything you buy into your set categories. See if you are actually adhering to your budget to keep your financial situation under control at all times. Use the extra money you have at the end of the month to pay off debt quicker, such as saving in a high interest savings account and prepaying your mortgage at the end of the year or invest the money.

Once you are able to get your budget under control, it will become easy to save for important purchases and items you actually need. And, adhering to a budget can become a fun, family thing too. Use creativity and imagination to stretch each and every dollar you spend.



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