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Create a monthly budget

Creating a monthly budget and monitoring your spending habits is a great way to save money and stay out of debt, but not everyone knows how to work out a monthly amount that covers their essential expenses and leaves them with enough to save a little at the end of each month. In this guide we'll explore what a monthly budget is, how a monthly budget can help you reach your financial goals, and the steps you can follow to create a monthly budget that works for you.

What is a monthly budget?

A monthly budget is a spending plan for the month that outlines how much money should be going towards different expenses. Monthly budgets can help you better manage your finances, as well as encourage savings and financial independence.

A proper monthly budget should cover the following areas:

  • Fixed living expenses: Rent or mortgage payments, car payments, bills, child support, and other essential costs that remain the same each month.
  • Variable living expenses: Gas money, car repairs and maintenance, grocery shopping, and any other expenses that may differ month-to-month.
  • Savings: The ideal budget should allow you to put some money towards your long-term savings goals, and you should also consider creating an emergency savings fund.
  • ‘Fun money’: A monthly budget shouldn’t just be about essential costs. You should also leave some money to spend on enjoying yourself.

How can a monthly budget help me reach my financial goals?

A monthly budget can help you reach your financial goals by giving you a clear idea of exactly how much you can afford to spend each month. This makes it far easier for you to keep track of your spending in the short-term.

Monthly budgets make it easier to see where money is going and whether or not there are any areas that could be improved upon, such as cutting down on unnecessary expenses or increasing the amount being put towards savings.

And keeping a close eye on short-term spending will help you with your long-term financial goals. You will know exactly how much extra money you have each month, which you can use to gradually build up your savings for the bigger financial steps in life.

How much money do I need for my monthly budget?

It depends on your financial situation, but generally your monthly budget should include money for all of your expenses.

Expenses can vary depending on what you’re buying, but it’s important to make sure they are met before considering any additional spending (like fun activities or savings).

Monthly budgets allow for more control over your finances than just saving a set amount at once or relying on luck to get by

What steps should I follow to create a monthly budget?

There are certain steps that should be followed to create the best possible monthly budgets, including: understanding your current financial situation, calculating your total income and working out all of your expenses.

1. Make sure you understand your current financial situation

In order to create an effective monthly budget it’s important first to understand your current financial situation.

You need a clear understanding of your level of cashflow, where your money is going, and how often, before you can properly assess your financial health.

2. Calculate your total monthly income

The second step in accurately working out a personal budget is figuring out exactly how much money you have coming in. That means calculating your total monthly income.

What you’re interested in here is your net income – that’s your take home pay, after your taxes, pension, and other automatic charges have been deducted. What you’re left with will form the basis of your monthly budget.

3. Calculate your monthly fixed expenses

Monthly budgets work best when you’re able to see where all of your money is going each month and how much spending money should be left over for other things. That means that next, you’re going to calculate your expenses.

Calculate all of your outgoings, including monthly rent or mortgage payments, groceries, entertainment costs, transport costs, and anything else you regularly spend money on. The more accurately you can detail your expenses, the more accurate your budget will be.

4. Calculate your disposable income

Once you have an accurate picture of how much you have coming in each month, and how much you’re spending, you can calculate your disposable income.

Your disposable income is what you have left each month minus all your expenses. In other words, your disposable income is your money, to do with as you see fit.

5. Leave room for your social life and other spending

Once you’ve worked out your disposable income, it’s important to leave a little bit of money for yourself so that you can enjoy life outside of work and save up for any future costs.

Monthly budgets should include enough money to cover all expected monthly expenses as well as spending habits that don’t count as essential costs.

While your financial health is clearly important, your happiness is too. That’s why a certain level of money left in your budget should be put towards doing the things that make life worth living.

6. Create an emergency fund

Monthly budgets are easier when they’re able to cover all expected costs, while still leaving room for the unexpected.

As we all know, financial emergencies happen, so you should set aside some money each month for an emergency savings fund. An emergency savings fund is a safe place to keep extra funds that can be used in the event of any unexpected expenses or emergencies.

How can I make my monthly budget more effective?

The most important thing to remember when creating a monthly budget is that it needs to be realistic and workable for your personal situation.

Monthly budgets should include everything you need each month, but they shouldn’t leave little or no room for fun activities and savings – this will make it harder to maintain the budget over time.

Where does debt repayment factor in?

You can’t truly enjoy financial freedom if you’re struggling to pay off debt. If you’ve borrowed money from a lender, debt repayment should form a key part of your budget. Key debts that you should budget for include:

  • Personal loans
  • Student loans
  • Credit card debt


If you find yourself struggling to juggle your living costs, savings, and debt repayment, it might be a good idea for you to seek professional financial advice.

Where can I get debt advice and more information on managing my finances?

Debt can cause havoc to your monthly budget. No matter how well you plan out your expenses, missed payments and other unexpected costs can put you under pressure.

It’s not enough to wait and hope that your debt problems will disappear. You need to be proactive in dealing with debt, and we can support you.

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