If you ever tried saving money or being more mindful of your expenses, you probably tried to create a monthly budget. Whether that worked or not, it’s another story. Because the truth is, sticking to a monthly budget is no piece of cake. There’s always some unexpected expense that throws your plan off the rails or that once a year payment that you forgot was coming up.

However, creating an effective monthly budget can set you in the right direction. And while it may not be perfect at first, you can always adjust as you go. 

So here is how you can create a monthly budget step by step.


  1. Create your budget way before the start of the month. 

A few days before the month starts, sit down and create your budget for the next month. If it’s your first time doing this, this is when you have to make all your calculations. If you are already doing it, this is the time to review and adjust. 


  1. Write down your income

First of all, write down all your income, from your salary to interest income and any other income you are certain you will have throughout the month.


  1. Create specific categories for your expenses

Make sure to create enough categories for all your expenses. These may depend on your lifestyle, career, and hobbies. In addition to having a category for each of your regular expenses, add another category for unusual one-time expenses. 


  1. Write down your fixed expenses

Start by writing down your fixed expenses such as mortgage or rent, insurance, and monthly subscriptions. 


  1. Write down common expenses

Now it’s time for the more variable expenses such as bills, eating out, and similar ones. If you don’t know what you regularly spend money on, check your bank statements from your last couple of months and look for repeated, regular expenses.


  1. Add a savings category

Savings should have a category of their own rather than just being the leftovers at the end of the month. If there are any. So make sure to budget that in. You may have an emergency fund or a specific savings account, depending on your goals. 


  1. Create a separate account for irregular expenses

You might have some expenses that you only pay once or twice per year. You certainly don’t want to wake up one morning and realize it’s time for your car insurance payment and you haven’t factored that in. So make sure to create an account for such expenses and add to it every month. For a yearly expense, for instance, divide it by 12 and add that sum to the account each month.


  1. Be realistic with your expenses

This may get better each month, once you have a clearer idea of all your expenses. But make sure to be realistic with your goals. This applies both to your expenses and your savings. 


  1. Keep a buffer

Leave some extra money as a buffer in case your expenses are exceeding your plan. In case you don’t end up spending those extra 100$ you can always add them to your savings. Note that this is not the emergency fund that you should have already added to your budget.


  1. Review and adjust

No plan is perfect from the beginning. Make sure to review your budget often during the month and adjust accordingly if needed. At the end of the month, check your budget to see how you’ve done and adjust your new budget accordingly. 
You can create an Excel or Google sheet file for your budget or you can use a budgeting app. There are plenty of apps and software out there, such as YNAB, Quicken, or Mint.