How to Make a Monthly Budget?
Started a fancy new job and trying to figure out how to make a monthly budget? Look no further!
This post is about how to make a monthly budget in 5 easy steps!
Let’s dive into the top 5 steps on how to make a monthly budget.
1. List Your Total Monthly Income
The very first step is to figure out what your total monthly income is. Gather all of your income sources: salary, freelance/side hustles, and any other forms of income. Can’t budget without knowing what you’re working with. Not sure how to do that? If you work a typical 9-5, you can gather a month’s worth of bank statements, pay stubs, etc. If you have a side hustle, it might require more work since it’s not as straightforward as bank statements or pay stubs, but it’ll be worth it! Plus, you might surprise yourself!
2. Track Your Expenses
Next step is to track your expenses, identifying what your fixed costs and variable costs are. Can’t figure out your budget without knowing what your necessary expenses are.
Fixed Costs
Fixed costs are expenses that are constant month after month. These are typically rent/mortgage payments, insurance (car, renter’s, home, etc), internet/phone bills.
Variable Costs
Variable costs are expenses that fluctuate, not constant every month. A great example would be utilities, such as electricity, water, and gas. Why? These can fluctuate based on usage. So, depending on the season, your electricity or gas bill could be higher than others (i.e. during winter, the heater’s typically used more vs during the summer, where the AC is utilized more). These costs, while they fluctuate, are also important to monitor.
3. Set Financial Goals
Figure out your financial goals. Want to buy a car in the next 5 years? Maybe even a property? This is where you’d start to figure out exactly how much to put into each bucket, and the timeline in which you want to get there. That’s why it’s important to complete steps 1 and 2 before you get to this step. If your income does not exceed your expenses, that’s a recipe for debt. Essentially, the focus would be on steps 1 and 2 if expenses exceed income.
However, if you still have additional money after figuring out your expenses, this is a great time to determine your financial goals; establishing short and long-term goals. Check this post out for SMART financial goals examples.
4. Allocate Your Income
Money is a tool. While there are a lot of emotions surrounding money, it is a tool and should be viewed as such. Using money to allocate into different categories depending what your financial goals are will help you reach financial freedom and independence. Remember to allocate to buckets like fixed expenses (rent/mortgage), variable expenses (utilities), debt repayments, savings, and fun money!
5. Automate!
Revisiting step 3 with the financial goals step, it’s easy to come up with the goals. It’s much more challenging to build momentum and contribute money towards them. That’s why this step is to automate your savings. It’ll make it infinitely easier to accomplish your financial goals. Automating essentially streamlines the process of saving up, making the process way easier. You don’t even have to think about it!
To reiterate, the top 5 steps on how to make a monthly budget are:
- List Your Total Monthly Income
- Track your expenses
- Set financial goals
- Allocate your income
- Automate
There you have it! Interested in learning more financial tips? Check this post out for more SMART financial goals examples.
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