How to create a monthly budget

Setting yourself a monthly budget is a fantastic way to stay in control of your spending and move ever closer towards your financial goals. In reality, no one wants to spend the rest of their lives living pay-day to pay-day. To move away from this habit, you need to have discipline and determination while you’re getting used to it, after that it all becomes second nature and you will feel much better about your monthly budgeting.

If you’re paid once a month then a monthly budget is even more critical, even if you pay all of your bills at the start of the month can you honestly say you never find yourself short towards the end of the month? Luckily, this is completely in your hands and you can start to make a change today.

First things first

Calculate your base income each month, this could be from full or part time work and any other source of regular cash flow. Things you shouldn’t include here are:

  • Bonus payments
  • Irregular overtime
  • Volatile investments.

The reason being you need to know the absolute minimum amount of income you will achieve each month, thereafter you will avoid setting yourself an unrealistic (or unreliable) monthly budget.

After you have done this, pay yourself first! We discuss this in more detail in our recent Top 3 Money Saving Tips post, however the general idea is before you pay for anything you should immediately set aside a percentage of your net income and use these funds for your investments. Like budgeting, setting aside money each month for investments will eventually become second nature.

How to create a monthly budget

Calculate and pay your bills

At this point, you need to calculate all of your bills (yes, including your gym membership and the subscription to that magazine you never read) to the cent and then total them up. Spreadsheets are your friend. As an alternative, there are plenty of innovative companies that offer budgeting apps completely for free.

Next stop, pay all of your bills remaining for the month so you’re not tempted to dip in to the funds reserved for them later on. If you do this manually, a simple yet effective way to make this even easier for you is to set up automatic payments. Most companies actually prefer this and the benefit for you is that it removes the possibility of forgetting to make your payments, especially if you are travelling abroad at the time or are occupied elsewhere.

calculate your bills

Divide your money for the remainder of the month

By now, you’ve paid yourself and all of your bills. Nice! Now you should divide your remaining funds per week for things like food, fun and socializing. We’re assuming here that you have an emergency fund in place for any large unexpected expenditure that may arise before your next pay-day.

Cash vs Card

So you’ve divided your funds for the remainder of the month, how are you going to make sure you stick to it? It works differently for everyone. Some prefer to have the cash and divide it equally for each week, others find it harder to manage this way. Find what works for you by testing both options.


Stick to it!

If you can stick to this for a least 3 months and ensure your monthly budget is accurate, you will find the following months far easier to financially manage. After that, you won’t even remember a time before you budgeted.

Maybe you are already budgeting each month but in a completely different way, leave us a comment below and let us know what works for you.