Budgeting generally deals with planning – it is planning specifically how you intend to spend your money based on the projects you have to execute. A monthly budget is a plan for how you will spend your money each month.
Monthly budgets are common because there are many recurring expenses, like rent, utilities, feeding and even other loan payments that occur on a monthly basis. For most people, budgeting just means having to spend less than you have or earn which is not far from the truth but in this post, we will expose you to steps or tips you can start now to take that can help you make monthly budgets and manage your finances properly.
- Calculate your Income
The first step to creating a monthly budget is to calculate and determine your income. What this simply means is that you calculate what your most consistent sources of income are, how much it is in total minus your taxes so what you have left is called your “net income”. This net income is your real take-home, that is, what you have at hand and after you get the figure, you can review it to be sure.
- Track your Expenses
The next step is for you to track your expenses and one very way to do this is to automate your expenses by downloading applications that lets you keep track of your expenses on your device from its store. If you would rather do it manually, you can break up your monthly expenses into specific buckets. For example, some people will group this into housing, transportation; utilities and food (exclude restaurants here). Then after those, you can use additional buckets like “Vacation”, “Clothes”, “basic hangouts” and etcetera. Do not forget that some of these expenses may not bill you monthly so review prior months to get a holistic picture of your monthly spend.
- Calculate the Difference – Prioritize your Finances
Here what you want to do is to review your expenses and if they are already greater than your savings, you will be left with just two options. It is either you increase your income stream so as to make money, or you cut down on your expenses to save more money. Speaking generally, it is much easier to reduce spending versus make more money so at this point, look back at your budget and determine what can be reduced from it. Having done this, allocate money in a way that it will make sense for you, not necessarily denying yourself of pleasure but prioritizing your needs and being disciplined while you make your allocation is necessary as you want to focus on your needs more than just wants to avoid unnecessary expenditure.
- Decide what to do with your savings
One popular rule of thumb for building a budget is the 50/30/20 budget rule. The rule states that you should allocate 50 percent of your income toward needs, 30 percent toward wants and 20 percent for savings. However, if you have any sort of debts, it would be best to clear that off before you apply this rule and also having an emergency fund too is good advise because anything can happen at any time and you do not want to be caught off guard simply because you are sticking to the 50/30/30 percent budget rule.
- Make this a Habit
Lastly, it is not enough to only desire to have a monthly budget; you have to practice it regularly to make sure that it becomes a part of you. Review your budget regularly, maybe once every two weeks, and then adjust it if it needs adjustments. Do this often and in good time, it will become part of you.
There you have it! Good luck!
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