Get savvy with savings: how to create a monthly budget

Read time: 4 minutes

Calculate your monthly income

The first step to creating a monthly budget is to determine how much money you make each month. This will be your limit for how much you can spend and save each month. Don’t include inconsistent sources of income, such as selling things you’re getting rid of.

Practice tracking your spending

Take at least two months to track everything you spend. This will give you the best estimate for the amount of expenses you need to budget for. You can keep track with pen and paper or use one of the many apps that will do it for you. Don’t forget to make note of any annual payments you make, such as property taxes.

Consider your financial priorities

After you have a few months’ worth of tracking, take time to look at your spending history and how it coincides with your financial priorities. When you’re not paying attention to how much you spend, it’s easy to spend more than you realize on things you don’t need. That’s not to say you shouldn’t buy nonessentials, but this helps you prioritize your financial goals.

Design your budget

Using an excel document or an app, create your list of line items within each spending category. For example, your categories could be savings, needs and wants. It’s a good idea to pay yourself first, starting with savings. Next, go through your list of needs, such as bills, groceries, transportation, etc. Lastly, list your wants. A good rule of thumb is the 50/30/20 rule. Put 50% of your income toward needs, 30% toward wants and 20% toward savings. The key is to spend what is left after saving, not save what is left after spending.

Adjust and refine as needed

TBudgets aren’t set in stone. Continue to track your spending and make adjustments to align with your financial priorities. For example, if you pay off a debt, you’ll need to adjust what you do with the new surplus of money. It’s often recommended you put this type of surplus toward savings since you’re used to living without that amount each month.