Author: Geoffrey Cage
Getting on a monthly budget is one of the best things you can do to improve your finances. But inconsistent income and growing expenses can make it difficult to have a budget.
To make monthly budgeting easier for you, this guide covers the steps involved in creating a suitable budget. So keep reading.
How to Create a Monthly Budget: A Step-by-Step g=Guide
1. Gather Your Financial Paperwork
Before you start preparing for your monthly budget, you need to gather and calculate your financial statements, including:
- All your Bank statements
- Investment accounts
- Current utility bills
- W-2s and paystubs
- Credit card statements and bills
- Receipts from the last three months
- Mortgage or auto loan statements
After getting and analyzing the information above, you should create a well-tailored plan that can help you with your monthly budget. Being knowledgeable about the above financial statement will not only help you for the month, but also ensure you know your financial strengths and weaknesses, and how to balance it up.
2. Make a Budget around your Goals
As you think about making a monthly budget, you should also consider other long-term goals like saving for retirement, buying a house, or paying your children’s school fees.
Without long-term planning for your budget, you may miss the important aspects required to start saving.
Also, your current budget should account for short-term goals like upgrading the computer you use for work.
3. Calculate your Monthly Income
Before you create a monthly budget, you should calculate how much money you make in a month. Your budget should ideally be below your monthly income to ensure there is extra money to save by the end of the month.
If you are retired and already living on a budget, then calculate how much you have to spend monthly.
But remember that your budget should consider months where your income is inconsistent or expenses increased.
4. Track and Deduct your Expenses
The next step in making your monthly budget is to record all your expenses. Some of your monthly expenses like monthly car repayment fees may be fixed, while others expenses like food and transportation may vary from month to month.
But you must keep track of everything you spend money on so you can properly create a budget.
Once you deduct your expenses, a smart move is to put any remaining money into your savings, investments, or emergency fund instead of adding it to the next month’s budget.
5. Design your Budget and Adjust if necessary
Once you have a clear picture of your earnings and expenses, you can now start creating a monthly budget with your goals in mind.
But as time passes, your income fluctuates, and expenses increase. You may need to revise and adjust your budget to fit your current financial situation.
Creating a monthly budget is like making any other type of budget, you will need to calculate your monthly income and expenses. But aim to live below your budget to ensure you have extra money to save.