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How to Make a Monthly Budget: The Step-by-Step Guide

A budget is a plan for your income and your expenses for a period of time. It can be weekly, monthly or annual. In this guide, we will focus on a monthly budget, but you can apply the same ideas to a weekly or annual budget. When you know how much money you are bringing in and how much money you are spending, you can make better decisions such as whether to save money or spend more. There are two main types of income: earned and unearned. Earned income is what you get from working. It could be your salary, wages, tips, or commission. Unearned income is money that you get from sources other than working. It could be interest on your savings account, dividends from stocks or mutual funds, or rent from a property you own.

Work Out Your Monthly Income

Your total monthly income is your earned income plus your unearned income. To find your total monthly income, simply add up all of your sources of income for the month.

Work Out Your Monthly Expenses

Now that you know your total monthly income, it’s time to track your expenses. Start by creating a list of all of your fixed expenses. These are the expenses that stay the same each month, such as your rent or mortgage payment, car payment, insurance premiums, and student loan payments.

Consider Other Expenses Which May Occur

Next, create a list of your variable expenses. These are the expenses that can fluctuate from month to month, such as your utility bills, groceries, gas for your car, and entertainment.

Creating Your Budget

Once you have a good idea of your monthly income and expenses, you can start to work on creating your budget. Begin by allocating money to your fixed expenses first, then move on to your variable expenses. Make sure to leave some room in your budget for unexpected expenses that may come up during the month.

You May Need To Make Some Cutbacks

If you find that your expenses are more than your income, don’t panic. There are ways to cut back on your spending and make adjustments to your budget. For example, you may need to find a cheaper apartment or get rid of your cable TV subscription.


Making a budget is a great way to get a handle on your finances. By following the steps above, you can create a budget that works for you and helps you reach your financial goals. Do you have any tips for creating a budget? Share them in the comments below! Budgeting doesn’t have to be difficult or boring – with a little planning, it can be easy and even fun!