How to Create a Monthly Budget

Posted on 28th Oct, 2016 by Barbara Davidson

Creating a budget and sticking to it can feel daunting, but putting it into practice doesn’t have to be hard. Making a habit of sticking to a monthly budget can help you pay off all of your regular expenses while still having enough to save. In this overview, we will provide steps, tips, tools and resources to help you budget successfully.

  1. Figure out your monthly take-home income.This is just the total amount you receive each month from your paychecks. It doesn’t factor in your income before taxes (and any other amount subtracted for insurance).
  1. Choose a budgeting plan.A budget must cover all of your needs, some of your wants and savings for emergencies and the future.
  1. Keep track of your spending.Record your spending in a journal or use one of the online budgeting tools we’ll discuss below.
  1. Set yourself up for success.Automate as much as possible to make allocating money to specific purposes/payments as easy as possible.
  1. Revisit your budget and tweak it as needed.Your income, expenses and priorities will continually change. Adjust your budget accordingly!
  1. Know why you’re budgeting.

If you’re developing a budget just because you feel like you should, it probably won’t help very much. The primary reason for budgeting is to help you spend less than you earn. It will show you the areas that are spending weaknesses and provide the structure for you to improve in those areas.

  1. Have a specific long-term goal in mind.

For many people, freedom from debt is their long-term budgeting goal. For others, it might be saving for a house or retirement. Whatever it is, having a big long-term goal in mind can be very useful when planning a budget. Knowing that the little sacrifices you are making will add up to something that you really want makes budgeting much more palatable.

  1. Use accurate spending information.

Budgeting works best if you use real numbers. This means pulling out bills and saving all of your receipts for a month or two and figuring out what you’re actually spending. Your first “budget” shouldn’t actually be a budget at all — it should simply reflect your spending habits in an average month.

  1. Have checking and savings accounts that have useful budgeting tools incorporated by default. 

Does your bank offer automatic transfers from your checking account to your savings account (or, even better, sub-accounts)? Does your bank offer online bill pay? Ideally, the answer to both of these is yes. Now, does your bank charge you maintenance fees on your account? Do you have to pay a lot of ATM fees? Ideally, this answer is no.

  1. Use a budgeting tool that you find easy to use.

If you start off by being overwhelmed by the complexity of the apps or software and the vast number of budgeting tools available, it’s going to be difficult to convince yourself to keep going with this. Your first budget should be incredibly easy to use and manage — and you should understand it from the inside out. For many people, getting started with a pencil and paper is the best way to go. Once you’ve gotten a handle on, try some of the tools and resources we’ve included below!

  1. Be realistic.

Small steps work; trying to take a massive step often results in failure. So don’t pledge to reduce your dining and entertainment spending by 80% right away. It won’t work over the long haul. Instead, average out what you’ve spent on dining and entertainment for the last few months, and pledge to cap that area at 5 – 10% below that average. Then, after some time and some success, trim it a bit more.

  1. Have some support from your friends and family.

Whenever you’re attempting to make a significant change in your life, it’s easier to make with a little support. Look to your spouse, parents or closest friends for help. If you surrounded yourself with people that actively overspend, you’ll be much more likely to overspend yourself.

  1. Set some short-term goals that you can easily achieve.

While long-term goals are great for feeling good about your general direction, they don’t always help with the day-to-day choices. It’s easy to convince yourself that one little slip-up won’t actually hurt your big goals, but one little slip-up can be the first pebble in an avalanche. So create some short-term goals. For example, you could set a monthly entertainment budget and go out guilt-free if you’re within budget at the end of the month. Use simple motivations to keep yourself on course!


Check out these Tools & Resources!



1 O’Shea, B. (March 30, 2016). How to Build a Budget. Retrieved October 13, 2016 from

2 Hamm, T. (July 12, 2015). Preparing a Budget? Ten Tips for Making That Budget Successful. Retrieved October 13, 2016 from

About Barbara Davidson

Babs is Lead Content Strategist and financial guru. She loves exploring fresh ways to save more and enjoy life on a budget! When she’s not writing, you’ll find her binge-watching musicals, reading in the (sporadic) Chicago sunshine and discovering great new places to eat. Accio, tacos!