There is no denying the serotonin boost you feel once you check your bank account on payday. You finally have a little bit more cushion on your debit card again.
Then, reality hits. You have rent due, a car bill and many other demands rushing through your mind before you can stop them.
However, a simple solution to such an overwhelming feeling is to create your own method in a way that benefits necessities and luxuries. This includes learning how to make a monthly budget that isn’t overwhelming.
How to Make a Monthly Budget in Five Steps
Take control of your finances with a savvy budgeting strategy. Get started with this step-by-step guide on how to make a monthly budget.
Step 1: Calculate Monthly Income
The first step to organizing a system for wealth for yourself is to see how much you’re typically working with in the first place. Take your monthly income (leaving out taxes and other payroll deductions, of course) and calculate the average amount you bring to your bank account.
If you are also someone who makes a little extra money with a side hustle or hobby, don’t forget to include that in all of your final calculations.
Step 2: Figure Monthly Demands
Every month comes with fixed amounts that you must pay before anything else. These include car bills, rent, electricity, etc. Sit down and calculate these costs before any others because they are what you need to live.
Also have a rough estimate of what groceries for you and your family look like monthly as well, although it may be different each time.
Step 3: Add-Up Non-Monthly Costs
You have to calculate costs that might not be at the top of your demands every month. These expenses are essential, but you might not plan to pay for them every month like you do with bills.
These things could include:
- Birthdays or holidays
- School tuition
- Quarterly taxes
- Auto registration fees
Add up all of these expenses and divide that total by 12, and the sum should be how much money you should put into a different savings account. You can draw from that account when needed.
Step 4: Remember Your Financial Goals
Remember that student-loan debt you’re trying to pay off? Or what about that car you want to have paid off in a few years?
Configure a rough estimate of your long-term financial goals. Then, try to put as much money as you can towards them each month. This will further your security when you are finally ready to spend during those times.
Step 5: Non-Essential Budget
This final step always sounds easy, but it can often be the most difficult part of budgeting. Discretionary spending is the money you spend on non-essential things such as a nice dinner with your friends or a spontaneous weekend retreat.
It is also important to enjoy these in moderation. Too much of a good thing can lead to a deficit in your bank account that you could have put towards long-term goals.
To guess this amount, take note of the last three months and configure how much you spent on these things. You can pick a month where you feel like you spent the usual amount, and set that as your example.
Monthly Budgeting: The Most Important Step
Once you find your monthly income, subtract it from your fixed expenses and long-term goal finances. That sum is the amount you have left to spend on discretionary items.
If your final answer turns out to be higher than what your usual discretionary sum is, then that is a sign that you have a little budgeting strategy to work towards.
Learning how to make a monthly budget is no small task, but with the right knowledge, it is possible.
Check out our website today for more tips and tricks on how to handle your money the right way!