How to Properly Budget Your Monthly Finances

What exactly is a monthly budget?

Creating a monthly budget is a great way to plan for how you will spend your money each month. Monthly budgets are a good idea, as there are many expenses we have, such as bills, utilities, and loan payments that occur on a monthly basis.

Ideally, your budget should involve spending less than you make each month, which will inevitably leave you with money you can set aside to save up. Budgeting for more than you earn in a month would mean the opposite, often spending saving or borrowing money to make ends meet, which will just draw you into an inevitable cycle.

Budgets should make it easier for you to plan for any expenses before they may happen, instead of hoping that you will have enough money to cover your essentials, or cover any potential emergencies that might occur. Budgets can also make you be more mindful of how you spend your money, which makes it easier to prioritize your spending on things that are most important to you.

Sure, it does not exactly sound like fun, but it is an essential part of sensible financial management that will keep you safe. Check out thesepersonal loans from CreditNinjato know more information on how to manage a yearly budget if your yearly finances are more of a concern than monthly finances.

Calculating your income.

The first step you need to take when you are building up a monthly budget is to figure out how much money you bring home each month. It is important that you ensure that whatever budget you build up, does not involve spending any more money than you make, as this would end up drawing you into long-term debt.

As you calculate your income, look at whatever your persisting sources of income are, include your paycheck from a full-time job for example, but exclude less reliable sources, such as selling old items.

Also ensure that you calculate your income, using your net income, knowing what you take home, already excluding how much is deducted via payroll.

Spending time tracking your spending.

One of the ways you can get an idea of how much you need to budget for your vital spending is to track your spending over the course of a couple of months. Obviously this is not totally ideal for everyone, but if you can then it can work out well. There are apps you can use to track your spending, however noting information in your bank and saving receipts can work too.

As you track how much you spend, you might find that you spend more or less than you may have thought in certain areas. This can be an eye-opener to your true financial situation.

You should also budget for expenses that might occur annually instead of monthly also. And, also, account for expenditures such as taxes, insurance payments, medical expenses and vacation expenses. A contingency fund is also ideal in the case of any emergency repairs.


So, if you have looked at how much you spend, you should think about how to prioritize your spending. We all have certain bills we cannot avoid, rent, utilities, food, and so on. You need to prioritize these first and foremost. Try to be thoughtful about how much you spend on non-essential items, especially if your funds are looking a little tight. You might find you are actually spending a hundred on takeout or online shopping, or eating out when you do not need to.

Budgeting is not about just limiting your spending to essentials, but it is about setting limits for yourself financially that makes sense for you. Think about your priorities and life goals, and when you see how you spend money, you can not only save yourself more money, but you may find you have more to spend on things that make you truly happy as well.

Designing a budget.

Designing your budget starts with the above and then moves on to how you will select your finances. You should pay yourself first. Try to set aside savings first, or an emergency fund, ideally you want to spend what is left after saving, rather than vice versa.

You should then look at your spending habits and prioritize them one by one. Rent, utility, and food are obviously very important, as well as medical expenses. Use your spending history as a guide for how you design your budget.

Try to use the 50/30/20 rule for budgeting, using 50% for what you need, 30% towards your wants and 20% for your savings. However, this is just a guideline, and realistically you can do it however you want, and of course your individual situation may not apply to this. You can come up with your own version of this that suits your individual situation.

There are not any real hard and fast strict rules for budgeting, the end goal is just to spend money in a way that benefits your financial situation and makes you happy. The only rule you should abide by is to try and spend less each month if you can. And, also, to avoid spending more money than you make, because this can lead to long-term debt.

Refining your budget.

Budgets are living things that follow you as you use them, they are not set in stone. You may encounter new expenses, or fewer expenses at any point, feel free to work your budget and alter it as needed to suit your situation. Keep on tracking your spending and work it around your needs and individual requirements.


Before you start your budget, you should try to do a few things to help yourself.

  • Gather together your financial documents, such as statements, receipts and so on, so your financial information is as accurate as possible. Do not guess.
  • Decide who your budget is for, is it just for you, or your whole family?
  • Check your pension if you contribute.
  • Always include one-off spending in your estimations.

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