How to Make a Personal Monthly Budget

Nov 18, 2020

Person calculating their budget with a calculator, paper, and laptop

Tips for Deciding How Much You Can Afford Every Month

Want to control your spending every month? Don’t have a set budget? Here, we will help show you how to make a personal monthly budget so you have a better understanding of how much you can afford every month. Here are a few tips you should follow.

Determine How Much You Make and Spend

Couple reviewing their expenses while they are setting a budget

Before allocating the amount of money you can spend onrndifferent things, you need to get an idea of your current income and monthlyrnexpenses. First, collect recent paystubs and calculate how much you make in arnmonth. Record the amount you take home each month after taxes are taken out.

Next, gather all of your bills that you paid last month. Separaternfixed expenses away from variable expenses. Fixed expenses are those that don’trnchange each month, such as student or car loans, monthly insurance payments, mortgage,rnand rent. Variable expenses will fluctuate month per month, such as the amountrnof electricity you use, how much you eat out, gifts, entertainment purchases, andrnthe amount of merchandise you buy from a store. If your variable expenses tendrnto fluctuate a lot, take a look at your expenses from the past two or threernmonths for an approximation.

[ READ MORE: Howrnto Make Money While in Quarantine ]

Review and Make Changes

Once you’ve collected all the numbers you need, add up the expenses, and see how it compares to your income. Your expenses should always be lower than your income, so if that’s what you see, you’re off to a great start.

Ideally, you will want to save roughly 20{e443ec709150c73baf180d3d8e0a41d703fa022f47b2bb5516b57735b7c7f19e} for savings and otherrnfuture investments. If you’re not saving quite enough, or are exceeding yourrnincome, it’s time to consider which expenses to drop going forward. Specifically,rnyou will want to review the unnecessary wants in your variable pile. These arernpurchases that you can live without. A few examples include dining out, movierntheater visits, and expensive merchandise purchases such as jewelry, video gamernconsoles, and home decorations. We recommend following the 50/30/20rnbudget rule to determine how much cash you can set aside for more luxuriousrnpurchases like these.

Track Your Expenses Moving Forward

It’s always good to set a budget before you start spending.rnHowever, that budget is no good if you don’t follow it. Track your expensesrnmoving forward to make sure you are staying within your budget as it can bernsurprisingly easy to accidentally overspend.

Need more tips and tricks like this? Follow the OkCarz blog for morerninformation on how you can better manage your finances.