Budgeting, Frugal Living

How To Make A Monthly Budget

Have you wondered how to make a monthly budget? If you are the type of person that just checks their bank account before buying something (that used to be me!) instead of already having the purchase planned out ahead of time, this can feel very overwhelming.

The word “budget” has a negative connotation to it. Many people use the phrase “on a budget” to describe someone’s (or their own) lowly financial situation. However, we should ALL be on a budget! Whether you make 15k, 50k, 100k, 200k per year…it doesn’t matter. A budget helps you to control your money instead of letting your money control you.

Here are the steps to take to get yourself started on the right foot when making your monthly budget for the first time.

1. Assess the Situation


The first thing you need to do is figure out how you are primarily spending money. Do you use cash? A debit card? Credit? Figure out every which way money is leaving your figurative pocket. In order to accurately make a budget, you need to find out where every penny goes.

Once you know your primary modes of spending, you need to analyze what you are spending your money on. Print out three months of bank and/or credit card statements. If you use cash, I hope you saved receipts… if not, make sure you do going forward.

Start a spreadsheet or notes page with the following headings: Groceries, Household (I like to combine those two–it’s up to you), restaurants, snacks/drinks, gas, clothing, online shopping, pet supplies, subscriptions, memberships, utilities, insurance, decor, services (like massage, cleaning companies, etc.), medical, repairs, charitable giving, and a miscellaneous category for anything else that pops up.

Make a separate spreadsheet for each month you are analyzing. I recommend doing this for at least three months of time so you can get an idea of your average spending (it will most likely vary month to month).

Go through your receipts and statements and categorize each expense. Some of them will be hard to categorize because you won’t remember what it is–they can be named vaguely sometimes. Just do your best.

2. Analyze Your Spending

After your spreadsheets are finished, add up your spending in each category for each month you did. This is essentially your current budget, whether you knew it or not.

How many coffees are you buying for an afternoon pick-me-up? How many lunches are you picking up on days you forgot to pack one? Even the pack of gum you bought at the gas station counts. Every. Dollar. Counts.

Evaluate these purchases. I remember the first time my husband and I did this, we were amazed at how much money we spent on things that didn’t seem worth it. My husband was spending so much on cafeteria lunches at work, and I had a bit of a Target problem.

We realized we had NOTHING to show for all the money we were spending. We knew on paper we made a decent combined income, but finances were still stressful. Seeing exactly just how much money was being spent on things we didn’t even care about was eye-opening.

3. Establish Your Values & Priorities


Some of your expenses are non-negotiable, such as rent/mortgage payment, water, electricity, food, and debt payments. There are things you can do in some of those areas to save some money, but those are posts for another day. Right now, consider them as they are. These need to be priorities in your budget.

Next are areas that are non-essential, but are important and valuable to you. This may include gym memberships, a date night allowance, and maybe some activities for your kids, like sports or music lessons.

Because you value these things, you will want to make room for them in your budget. However, some of these items may not make your new budget if your money is stretched too thin.

Finally, there are the expenses that aren’t worth what you spent on them, such as that drive-thru run you did with the kids because you forgot to pack snacks and running errands took longer than expected. These sorts of things happen to all of us from time to time. Add up how much money is being spent on things like this and decide if you feel that is reasonable.

I call this money “blow money” because that’s basically what you do with it. 😉 We all need a bit of blow money–it just isn’t realistic not to have any unless you are an extremely good planner with an iron will. If you are, great, don’t give yourself any. If you aren’t, don’t feel bad–just plan for it. And plan for a reasonable amount. You do not need $500 of blow money each month!

4. Make A Plan

“Budget” is just a word for “money plan”. You need to make a plan for your finances moving forward. If you don’t make a plan for your money, you don’t have control of your money. Period.

People who don’t plan and track their finances are not as good with their money as they think they are. There is no doubt that more money is going to waste than they even realize.

Now that you know what you are spending in all major areas, it’s time to input that into a budget spreadsheet. In this day and age, you have so many budget applications to choose from. how-to-make-a-monthly-budget-every-dollar

My husband and I use Every Dollar and love it. It’s very straight forward and easy to use without a ton of confusing bells & whistles. It is free (there is a premium version you can purchase–the only difference is it connects your bank account to automatically upload transactions) and it gets the job done.

There are some other budget applications out there that might be more your speed if you don’t like Every Dollar. Mint is one free option, and You Need A Budget is another popular program but is not free.

The first thing you need to do is budget in your top priorities (rent/mortgage, electricity, etc). Next, add in the non-essentials that hold value for your family. Finally, figure out what to do with the wasted expenses. How much of those wasted expenses do you think you could eliminate with some concentrated effort next month?

How many of them do you think are likely to be repeated? Time to plan for it. The amount you need to budget for blow money will depend on how much you are currently spending and what you think you can do to lower that bill.

5. What About Leftover Money?

If you’re lucky enough to have leftover money in your budget, it’s time to figure out what to do with it. I am a big believer in a Zero-Based Budget. A zero-based budget just means you assign every. single. dollar. to a category in your budget. If you don’t, I guarantee the money will not be put to good use.

It will just sit there, which may look pretty, but eventually, you’ll get the false sense that you have more money than you really do and spend it on an impulse purchase.

If you don’t think you’d spend it, then it’s just sitting there collecting 0.04% interest (the average interest rate for an interest-bearing checking account). You can certainly do much better than that!

Here is what I recommend you do with leftover money in your budget. (Please note I am not a financial expert–just someone who has been working as hard as she can to manage her finances the best that she can).


Make sure you have some savings. How much you need in savings depends on where you are at in your life–consider what your monthly expenses are, if you have kids, if you have any debt…etc.

If you are completely debt free, it’s a good idea to have as much as six months worth of expenses in your savings account. If you still have debt, you still need some savings, but it might not be as high right now.

Some people disagree with that line of thinking and believe that having 6-months of expenses is important no matter where you are with your finances, but honestly if you were to have an emergency that required you to access your savings (like a job loss), so much of your hard-earned savings would be going to creditors while you were in a state of emergency. Not to mention it’s hard to save that much money when you’re paying on debt. It’s best to get that debt gone ASAP.

Financial expert Dave Ramsey recommends having $1000 in savings while you are working on paying off debt. He recommends that for a couple of reasons. One: It is a pretty small amount in the grand scheme of life, but it’s enough to keep you from reaching for a credit card (most of the time) if a mini emergency came along.

Another reason to keep it small is that it should light a fire under your butt to work on getting out of debt even faster! You don’t want to let yourself feel too comfortable or paying off debt won’t be a priority.

Pay Extra On Debt

Another great thing to do with money left over in the budget it put it towards debt. Wouldn’t it feel great to not have to pay $300 a month on your car anymore? Or $500 to a credit card? Yes…yes it would feel great. Make it a goal and attack that goal!

Becoming debt free is not easy, but it is so worth it.

Save for an Upcoming Expense

Christmas, birthdays, anniversaries, a medical bill for a recent procedure…you know these things are coming. Start a fund to save for them.


If you otherwise have all of your ducks in a row, you can always add it to retirement!

Do you have any tips for creating a monthly budget? Any questions? Let me know in the comments!


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  1. Daniel says:

    Hello Holly, I must say that this article is very helpful and informative. Making a monthly budget is not easy at all especially when you have 3 small kids. Luckily, I am free of depts but clothes, food, school, that everything affects the budget and I am the only one who works. thank you so much for sharing your knowledge about this as it will definitely help me to make a plan.

    1. admin says:

      Glad you found it helpful!

  2. AJ says:

    Hi Holly,

    Thank you for the tips! I definitely can relate! I used to not manage my money properly but now I work closely with my wife and everything is on budget. I admit, sometimes we fail to do it because it really takes a lot of time. 

    I’m interested in Every Dollar. I think this will make our budgeting a lot easier. Will check it out and give feedback. Thank you! All the best!

    1. admin says:

      Thanks AJ, glad you found it helpful!

  3. Scott Hinkle says:

    Thank you for this post!

    I still live my life, not so much with a budget as with a spreadsheet showing my bills for this pay period (yes I still live paycheck to paycheck).  The hard part is I simply don’t budget for anything.

    I have a goal of having $1000 available in my account at all times and money for gas and food but those aren’t on my spreadsheet because gas and food varies and I’m OCD (everything must be known).  I keep telling myself I can just set an average or estimate but, when it comes to actually doing it, I don’t.

    I think that part of my problem is digging myself into a financial hole where I’m barely able to keep afloat at times.  This has let me to planning ways to dig myself out.

    I’ve begun analyzing our spending and consolidating debt to lower minimum payments and be able to pay off more at a time.  This has helped tremendously.  Prioritizing has helped me to focus better on my goals as well.

    Thank you so much for these tips.  They’re like a 3rd party validation that the steps I’m taking are the correct ones (well, that and seeing that I’m actually making headway now).


    1. admin says:

      Hi Scott–I’m glad you found this helpful! Do you primarily use cash or debit/credit? The reason I ask is that if you use debit or credit, you can go through your expenditures from the past few months and categorize each one as best as you can (it can be difficult–some charges come through with weird names!) This will help you see if you spend consistent amounts each month or if you’re all over the place. If it’s relatively consistent, then you will know what you need to budget for that area of your life. If it’s not consistent, going forward you will probably want to start saving receipts to see if you can figure out a pattern.

      Another thing you might try is the cash envelope system. You decide what areas of your life need an envelope (we usually do groceries, restaurants, clothing, and entertainment). I just do the areas that are easy to overspend on. I pull out the cash I need for that week or month, depending on how you want to budget it and if you want to fund it all at once or spread out. Then I keep them in the envelopes in my purse. When my envelope is empty, that means I can’t spend any more (or I need to borrow from another fund–can’t be spending money on entertainment if I’m out of food money!) The envelope system is great because it helps you feel more connected to your money. It is becoming less and less common to carry cash nowadays, and studies show we are all overspending because of it!

      Good luck, Scott!

  4. Henderson says:

    This is a very accurate post. I think it’s hard to actually lay down a budget  because sometimes, we don’t remember somethings we actually spend the money on. For me, I usually have unexpected expenses popping up here and there and so it’s hard to have a fixed budget but ofcourse I make sure I have something for my savings. I have strict no spend policy to my  my savings Nd that has really helped. I will put in consideration what you have written and see how it helps me at the end of the month. Thanks

    1. admin says:

      Yes, it definitely takes a while to get in the swing of things! The first few months of creating a zero dollar budget can be challenging, but eventually, you get the hang of it and start to learn your true spending patterns and can budget more appropriately. 

      I do keep a “miscellaneous” section of $100 to $150 depending on the month to cover some of these random pop-up things. This works as long as I don’t look at the miscellaneous fund as a shopping fund. 😉 Then if I don’t spend it all, I have money left over to send to savings or use for whatever purpose. It’s nice!

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