A budget is a financial plan that helps you manage your money.
Creating a monthly budget allows you to have control over your finances. Budgets allow you to see where your money goes monthly, pay off existing debt, and save money each month. A Budget is an excellent tool for money management.

Tracking your income and expenses can help you avoid overspending or running out of money. Knowing where your money goes gives you confidence in your financial decisions. You can also plan for life’s unpredictable events and afford buying big purchases without going into debt.

Creating A Monthly Budget

Step 1: Categorize your Expenses

When setting up a monthly budget, start with big categories before breaking your budget into smaller expense categories. A good list of basic budget categories to begin with includes the following:

• Housing: Mortgage/rent, property taxes, homeowner’s/renter’s insurance, utilities, cleaning supplies, furnishing, decor.
• Food: Groceries, meals out, food delivery, snacks and beverages at work.
• Transportation: Car payments, insurance, gas, oil changes, parking, repairs and maintenance, public transportation fees.
• Medical: Insurance, out-of-pocket expenses such as deductibles, non-insurance-covered medical services, pharmacy, eye care, and dental.
• Clothing: New purchases, dry cleaning, repair.
• Personal: cosmetics, haircuts, cleansers, cosmetic procedures.
• Insurance: Life insurance and any other insurance not covered under home, transportation, or medical expenses.
• Education: Tuition, dues/fees, school pictures, yearbooks, school supplies, books.
• Credit Accounts: Major credit cards, department store cards, lines of credit through your bank or other lender, and any other outstanding debt.
• Gifts: Holidays, birthdays, graduations, weddings, bridal showers, or any other event that costs money.
• Recreation: Vacations, movies, books, magazines, TV (cable, satellite, and/or streaming services), restaurants, sporting events, and sports equipment.
• Savings: Long-term and short-term goals, as well as retirement
• Taxes: Property
• Donations: Charities, religious groups, and so on.

Set aside monthly money for those yearly and quarterly payments that often sneak up on you when you least expect them. If you spend $1,200 on your yearly property taxes, for example, and that payment isn’t included in your mortgage payment, divide that number by 12 and set aside $100 per month so you aren’t caught off guard with your property taxes, insurance payment, or any other periodic bills.

Within each general budget category, some items are essential (the mortgage or rent payment, electric bill, and groceries); others are extra (new furniture, gifts, and food delivery). From your first list of general budget items, develop two separate budgets, one for essentials and the other for extras. Then, look through these lists to find flexible budget expenses where you can cut back. Put a star next to these flexible items so you can identify them.

Step 2:  Check What You Spend

Go through your checking account and any other receipts or records (paper and/or online) you’ve kept over the past few months to track how much money you spend on essentials. Then, for one month, keep a detailed diary of all your extra purchases, even for cheap things like coffee at your favourite café or snacks from a vending machine at work. Little expenses quickly add up to big money when they’re made daily.

These smaller out-of-pocket purchases are frequently made with cash, so they usually don’t appear in your receipts. Writing them down makes you aware of where the cash is going.

Step 3: Calculate And Adjust

Are your spending habits keeping you in the red? To find out, add the essentials list and the extra list separately. Subtract the essential total from your monthly income. If you have money left over, subtract the extras total from that amount. If you still have money left over, great. Look into savings or investing plans. Talk to your bank or financial advisor for help setting up a plan.

If your extras list makes you negative numbers, start looking for places to cut back (for example, eat out once a month instead of once a week). You can also trim from the extras list to put more money toward debt repayment if that’s a high priority for you.

Your Budget Should Look Similar To This When You Are Finished

Personal Budget:

1. Income:

• List all sources of income, including salary, freelance work, investments, etc.

2. Fixed Expenses:

• Housing: Rent or mortgage. Property taxes
• Home & car insurance
• Utilities: Electricity, water, gas.
• Internet and phone bills
• Car payments
• Fuel or public transportation costs.
• Health insurance.
• Life insurance.

Debt Repayment:

• Credit card payments.
• Student loans.

Subscriptions:

• Streaming services, magazines, etc.

3. Variable Expense

Allocate a monthly budget.

• Groceries
• Entertainment: Dining out, movies, hobbies.
• Health and Wellness: Gym memberships, wellness products.
• Personal Care: Toiletries, grooming.

4. Savings:

• Allocate a portion for emergency savings and long-term goals (e.g., buying a home, education, retirement).

5. Consider Future Crowth:

• Plan for potential increases in expenses (e.g., childcare as your family grows).

6. Emergency Fund:

• Set aside funds for unexpected expenses or emergencies.

7. Investments and Retirement:

• Allocate funds for investments and retirement savings.

8. Monitoring and Adjustments:

• Regularly review your budget and adjust as your cicumstances change.

Consistency, adaptability, and regular review are key to successful budgeting. Flexibility is important for adjusting the budget based on changing circumstances and goals, whether for business or personal finances.

I’m sure you understand how this budget works now. Modify it and make it easy for you to maintain. It’s all about controlling your finances and achieving greater financial success. It will help you reach your financial goals.

Check out this article: https://masteringpersonalfinances.com/7-components-of-personal-finance/