Do you ever feel like banging your head against the wall whenever you think about starting a monthly budget? Trust me, I can totally relate! Learning how to take care of your finances is one of the most crucial steps you can take to secure a better future for yourself.
Related: How To Pay Off Debt And Get Out Of Financial Trouble
What is a monthly budget?
Think of a budget as your game plan for all that hard-earned cash of yours. It’s basically a smart estimate of how much money you’re going to bring in and spend over a set period, like a month or even a year. When you set up your monthly budget, you’re figuring out how to balance your income and expenses to keep things running smoothly.
There are a few different types of budgets:
50/30/20 budget
With the 50/30/20 budget plan, you break down your income into three easy categories. Half of it—50%—goes towards your essentials like bills and groceries. Another 30% is for those things you enjoy and want to spend on. The last 20% is all about boosting your savings or tackling any debt. It’s a super straightforward way to manage your monthly budget and make sure you’re covering your basics while still having some fun and planning for the future!
The envelope system
The envelope system is a super simple way to keep your spending in check and stick to your monthly budget. It works like this: you split your cash into different envelopes, each for a specific category, like groceries or entertainment. When an envelope is empty, you’re done spending in that category until next month. It’s a pretty foolproof method to avoid overspending and stay on track with your budget!
Paying yourself first
Otherwise known as a “reverse budget”. With this type of budget, you set your goals first and decide how much you want to save. Your goals can be anything from retirement to an emergency fund. Use the rest for bills and other costs.
The zero-based budget
Whether you’re an impulse spender or a meticulous planner, this budget plan works for everyone. It makes keeping track of your money a breeze. Just take your monthly income and assign every single dollar a job until you’ve got nothing left. It’s all about being intentional with your cash so you stay on top of your monthly budget with ease.
I recommend using NerdWallet’s guide to choosing the right budget for you.
How do I get started?
By following these steps, you’ll be budgeting your money in no time, even if you’re not good with money.
- Calculate your income
- List all of your expenses
- Create and track your budget
Let’s get started!
Calculate your income
Now that you’ve got your monthly budget strategy locked down, it’s time to have some fun with numbers! Calculate your monthly income and be sure to include all those awesome sources like side hustles, government benefits, and even child support. The more sources of income you include, the merrier your financial picture will be!
List all of your expenses
Once you have calculated the inflow of funds into your bank account, it is time to calculate the outflow. Take a look at your bank statements from the past 2-3 months to determine where your money is being spent. Some expenses, like rent, are fixed, while others, like gas and groceries, are variable. Here is a list of common expenses to include in your budget.
Create and track your budget
Yay! You’ve got all the income and expense details you need. It’s time to dive into the exciting world of monthly budgeting. With this financial roadmap, you’ll be able to take control of your money like a pro! Let’s get started and budget with lots of enthusiasm!
While you can track your monthly spending habits using pen and paper, I recommend using a budgeting app such as Simplifi by Quicken to make things so much easier.
Once you’ve got your monthly budget in place, it’s smooth sailing from there! Tracking your progress becomes a breeze. You might find that some categories need a little tweaking along the way. And remember, once you’ve created your budget, it’s crucial to stick to it like glue.
You’ll often find finance sites like Mint and NerdWallet suggesting the 50/30/20 rule, but let’s be real, it’s not always doable for everyone. Especially if you’re barely making ends meet paycheck to paycheck.
Budgeting is a never-ending gig, but the aim is to keep getting better each month. It’s all about knowing where your money is going and finding ways to cut back on spending. Discover a budget that suits you and stick with it. Before you know it, you’ll be on your way to financial freedom!
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