<p>No matter how little or how much money you earn, creating a monthly budget is one of the most important aspects of managing your finances. <strong>What gets measured gets managed</strong>. </p>
<p>Having a budget doesn't stop you from spending money the way you want it to, but works like a partner to track your spending and allocating resources to help you reach your financial goals.</p>


A Monthly Budget For Your Money

Money & Investments

<p>The Envelope system is a way to track your variable expenses like food, entertainment, and drinks.</p>
<p>This method, preferably used weekly, allocates a certain amount in each category in labeled envelopes (food, drinks, movies, etc.). <b>Once the envelope is empty, you are done spending in that category.</b></p>


The Envelope System

<p>The principles that make a good budget, something you can stick to:</p>
<ul>
<li><i>Being Realistic: Being too strict is a recipe for failure.</i></li>
<li><i>Making Adjustments: A budget is not set in stone, but a fluid thing.</i></li>
<li><i>A Team Sport: If you live with a partner or spouse, you have to agree mutually on how to budget the financials.</i></li>
<li><i>Expect the Unexpected: Keep an emergency fund, ideally 3-6 months of necessary expenses.</i></li>
<li><i>Budgeting the Expected: Certain upcoming expenses need to be budgeted in advance, like property tax, holiday shopping, etc.</i></li>
</ul>


How to Create a Good Budget

<p>Follow these simple steps and start Budgeting:</p>
<ul>
<li><i>Choose the right tool (Budgeting App, Excel sheet or Envelopes)</i></li>
<li><i>Gather all information like your bank and investment account numbers, user id's, and passwords.</i></li>
<li><i>Make a list of all your income sources and all your expenses.</i></li>
<li><i>Share the important financial and budgeting details with your partner or spouse if applicable.</i></li>
</ul>


Start Budgeting

<p>It breaks down your budget categories into three broad segments:</p>
<ul>
<li><i>50%: Essential Expenses like housing, automobile expenses, groceries, insurance, utilities, etc.</i></li>
<li><i>30%: Discretionary Expenses (Non-essential) like Dining out, entertainment, drinks, etc.</i></li>
<li><i>20%: Financial Goals including mortgage, home, and educational savings.</i></li>
</ul>
<p>If there is heavy credit-card debt, the financial goals should be 30% and non-essential spendings only 20%.</p>


The 50/30/20 Rule

<div>
<h4>Creating a monthly budget is one of the most important aspects of personal finance. A monthly budget can show where you're overspending, where you need to make adjustments, and how far along you are toward reaching your financial goals. We'll show you how to budget painlessly!</h4>
<p>Everyone needs a budget, no matter how much or how little money you make. A budget does a lot more than track spending. A good budget can help you absorb unexpected expenses like car repairs and medical bills.</p>
<p>A monthly budget can help you find extra money for your savings goals. Essentially, a budget shows how much money is coming in, how much is going out, and <strong>where it's going.</strong></p>
<p>Trying to reach your financial goals without a budget is like trying to reach a destination without a map <em>(or Google Map here in the 21st Century).</em> You might get there eventually, but it will take a lot longer, and you will waste a lot of money along the way.</p>
<blockquote>
<p>Don't think of a budget as a punishment, this thing that is stopping you from spending your money the way you want. Nothing can do that, not even the world's greatest budget.</p>
</blockquote>
<p>Instead, think of a budget as a partner that will help you reach your financial goals.</p>
<h2>How Do I Make A Monthly Budget?</h2>
<p>The good news is that these days thanks to all of the great budgeting tools available, you're no longer stuck with the old Excel spreadsheet method of budgeting.</p>
<p>No, budgeting apps have brought creating a budget into the current Millennium.</p>
<h3>Mint</h3>
<p><a href="https://www.listenmoneymatters.com/mint-review/">Mint</a> is such a great way to automate <a href="https://www.listenmoneymatters.com/mint/">budgeting </a>so that it's painless. No more sitting down every month and going through bank statements to see where you spent your money.</p>
<p>Once you create your account and link your bank and credit card accounts, Mint automatically downloads your transactions and categorizes them for you.</p>
<p>This may need some tweaking, but Mint mostly gets it right.</p>
<a href="https://www.listenmoneymatters.com/mint/"><figure><iframe src="https://www.listenmoneymatters.com/wp-content/uploads/2014/01/unnamed.png" frameborder="0" width="560" height="315"></iframe><img src="https://www.listenmoneymatters.com/wp-content/uploads/2014/01/unnamed.png"> </figure> </a> <p>We literally <a href="https://www.listenmoneymatters.com/mastering-mint/">wrote the book</a> on how to make a budget with Mint!</p>
<h3>You Need A Budget</h3>
<p>We love Mint, but there is a better budgeting tool for anyone who has irregular income. Maybe your monthly income varies because you have a side hustle or have a commission-based job like a real estate agent.</p>
<p>If that's the case, Mint and similar budgeting apps are a bit harder to work with. But <a href="https://www.listenmoneymatters.com/ynab-review/">You Need A Budget</a> (YNAB) is just what you're looking for.</p>
<p>YNAB uses a method known as <a href="https://www.youneedabudget.com/tell-your-budget-the-truth/">Zero-Based Budgeting. </a></p>
<blockquote>
<p>Zero-based budgeting is a method that encourages you to allocate every penny of your monthly income toward expenses, savings, and debt payments. That means giving every dollar a job. In other words, only budget what you have right now.</p>
</blockquote>
<p>What do you have? You have the money you made last month. That's the known quantity since you have irregular income. With <a href="https://www.listenmoneymatters.com/ynab/">YNAB</a>, you'll budget the money you made last month for the following month.</p>
<a href="https://www.listenmoneymatters.com/ynab/"><figure><iframe src="https://www.listenmoneymatters.com/wp-content/uploads/2019/07/YNAB-REVIEW-3.jpg" frameborder="0" width="560" height="315"></iframe><img src="https://www.listenmoneymatters.com/wp-content/uploads/2019/07/YNAB-REVIEW-3.jpg"> </figure> </a> <p>YNAB's learning curve is steeper than Mint, and it can take a month or two to make its system of zero-based budgeting work, but it's the best monthly budget system if your take-home pay is up and down.</p>
<h3>The Envelope System</h3>
<p>If your spending habits are out of control and you've tried and failed other budgeting methods in the past, the envelope system might be the solution for you.</p>
<p>You don't need to use this method for essential expenses like housing and utilities. Those aren't the categories people are overspending in.</p>
<p>Instead, you use the system for variable expenses that you do overspend on like food, entertainment, and drinks. Write the name of the spending category on the front of each envelope and put the budgeting amount of money in each.</p>
<p>You can do this monthly but weekly is better because it's not ideal to carry around a lot of cash. Every time you spend in an envelope category, you pay with money from the designated envelope.</p>
<p><strong>Once an envelope is empty, you're done spending in that category.</strong> Simple!</p>
<p>You can do this the old fashioned way with actual envelopes, but there are budgeting apps that simulate it like <strong>Goodbudget</strong> and <strong>Mvelopes.</strong></p>
<h2>What Is a Good Budget?</h2>
<p>A good budget is one that you can stick to! That's a bit flip; there's more to a reasonable monthly budget so let's go over some basic budgeting principles and a few budgeting tips.</p>
<h3>Be Realistic</h3>
<p>If you have <a href="https://www.listenmoneymatters.com/tally-review/">debt from credit cards</a> or <a href="https://www.listenmoneymatters.com/how-to-handle-your-student-loans-like-a-pro/">student loans,</a> you might decide to create a budget to get rid of that debt quickly. And that's great, debt payments are money you could be saving, and high-interest debt is an emergency.</p>
<p>So you create a budget that is pared to the bone. I'm talking ramen dinners and single-ply toilet paper level of bare bones.</p>
<strong>But this is a mistake.</strong> <blockquote>
<p>A budget, like a diet, that doesn't allow for any wiggle room, any pleasure is not sustainable.</p>
</blockquote>
<p>If you try to implement a budget that is too strict, you'll fail.</p>
<h3>Make Adjustments</h3>
<p>Your <em><strong>first</strong> </em>budget should not be your <em><strong>last</strong> </em>budget. A budget is a fluid thing, and you should make changes to it as your financial situation changes.</p>
<p>If you get a substantial raise, you don't want to just put any money left over after your monthly expenses into your savings account. You want that money to <a href="https://www.listenmoneymatters.com/investing-in-the-age-of-anxiety/">work for you. </a></p>
<h3>It's a Team Sport</h3>
<p>If you live with a partner or spouse, budgeting becomes a team sport. The two of you have to agree on how you're going to budget your money.</p>
<p>Not down to the penny, but you do have to have a level of general agreement.If you don't, you're going to have <em><strong>a lot</strong> </em>of fights about money.</p>
<h3> Budget for the Unexpected</h3>
<p>How can you budget for the unexpected? You have no way of knowing what an unexpected thing will cost?!</p>
<p>You need to be saving money in your budget each month for an <a href="https://www.listenmoneymatters.com/importance-emergency-fund/">emergency fund.</a> An emergency fund is the way you deal with unexpected expenses. How much?</p>
<blockquote>
<p>Ideally, your emergency fund will contain 3 to 6 month's worth of necessary expenses.</p>
</blockquote>
<p>That's a lot of money, and you don't have to come up with it in two months, but it should be at the top of your list of savings goals because an emergency fund can save you from a severe financial crisis.</p>
<h3>Budget for the Expected</h3>
<p>By expected, we mean expenses that aren't monthly but <em><strong>are</strong> </em>regular. These can be things like your property tax bill, a yearly family <a href="https://www.listenmoneymatters.com/ways-to-save-money-travelling/">vacation,</a> or Christmas.</p>
<p>People often seem blindsided by these kinds of expenses and scramble to come up with the money to pay them.</p>
<p>But these expenses happen at pretty much the same time every year, so it's not as if you didn't know they were coming. Budgeting a little money each month for significant, expected expenses will allow you to absorb them more easily.</p>
<div>Get our best strategies, tools, and support sent straight to your inbox. </div>
<h2>How To Get Started Budgeting</h2>
<p>Don't be intimidated if this is your very first budget! Budgeting isn't complicated or time-consuming. Follow these steps, and you'll be a budgeting pro in no time.</p>
<h3>Choose Your Tool</h3>
<p>We explained a few different budgeting tools above. Mint is free to use, and YNAB offers a free 34-day trial. Goodbudget has both a free version and a paid one, and Mvelopes starts at just $6 per month.</p>
<p>Try a few options out until you find the one that works best for you.</p>
<h3>Gather Necessary Information</h3>
<p>If you're going to use budgeting apps, you'll need to provide them with some information like account information for bank accounts, credit card accounts, student loan accounts, <a href="https://www.listenmoneymatters.com/betterment-review/">investment accounts,</a> etc.</p>
<p>Have account numbers, user names, and passwords before you get started so you can get all of the necessary information entered quickly.</p>
<p>If you're understandably nervous about handing over such sensitive information, do some research on the security measures these apps have in place to keep your data safe.</p>
<h3>Make an Appointment</h3>
<p>This only applies to those who share finances with a partner. Let them know that you want to work on a budget with them, tell them the information they need to provide (what we discussed in the above point) and schedule a time and day to sit down and create your monthly budget together.</p>
<p>Making a budget is not the kind of thing you should spring on your partner.</p>
<h3>Make a List</h3>
<p>Make a list of all of your income sources and all of your expenses. These things are going to be the entries you make in your budget, so again, you want to have them on hand when you sit down to create yours.</p>
<h2>What Is the 50/30/20 Budget Rule?</h2>
<p>What's missing from the last section? Yes, <strong>how to budget your money!</strong> We wanted to give that its own section. We like to keep things simple, and the 50/30/20 budget rule is straightforward.</p>
<div>
<p><strong>The 50/30/20 Rule</strong> doesn't require creating detailed budget categories. It's broken down into three broad segments, essential expenses, discretionary expenses, and financial goals.</p>
</div>
<p>Can you make budgeting harder?</p>
<figure><iframe src="https://www.listenmoneymatters.com/wp-content/uploads/2016/10/Budget.png" frameborder="0" width="560" height="315"></iframe><img src="https://www.listenmoneymatters.com/wp-content/uploads/2016/10/Budget.png"> </figure> <p>Of course, but why would you!? The money you're dividing up is your net income, your take-home pay. This is a summary of the rule; we did a deep dive that will <a href="https://www.listenmoneymatters.com/budget-categories-50-30-20-rule/">explain it more fully.</a></p>
<h3>50%: Essential Expenses</h3>
<p>Half of your net income is budgeted for things you must pay for, which can include:</p>
<ul>
	<li>Housing</li>
	<li>Auto expenses</li>
	<li>Groceries</li>
	<li>Insurance</li>
	<li>Utilities</li>
</ul>
<h3>30%: Discretionary Expenses</h3>
<p>Thirty percent of your net income goes to non-essential spending. This is the fun stuff like:</p>
<ul>
	<li>Dining out</li>
	<li>Entertainment</li>
	<li>Drinks</li>
	<li>Gym membership</li>
</ul>
<h3>20%: Financial Goals</h3>
<p>The final 20% is the most essential part of your budget and one that often gets overlooked. If you don't budget money for financial goals, you may spend all of your monthly income. Financial goals include:</p>
<ul>
	<li>Debt repayment</li>
	<li>Saving for a home</li>
	<li>Saving for a child's education</li>
</ul>
<h3>20/30</h3>
<p>If you have high-interest debt, like credit card debt, you should seriously consider swapping around the 30% and 20%.</p>
<p>Meaning you should budget <strong>30%</strong> of your net income to getting that debt paid off as quickly as possible and cut back your discretionary spending to 20% of your budget.</p>
<p>No, it isn't fun, but neither is being bogged down by credit card debt.</p>
<h2>That's All There Is To It!</h2>
<p>Creating a monthly budget is one of the fastest, easiest things you can do to take control of your finances and put yourself on the path to <a href="https://www.listenmoneymatters.com/creating-financial-success/">financial success.</a> If you've been putting it off, use this guide to help.</p> 
</div>

Creating a monthly budget is one of the most important aspects of personal finance. A monthly budget can show where you're overspending, where you need to make adjustments, and how far along you are toward reaching your financial goals. We'll show you how to budget painlessly!

Bite‑sized knowledge
to upgrade
your career

Your Complete Guide to Creating a Monthly Budget in 2020

A Monthly Budget For Your Money

The Envelope System

How to Create a Good Budget

Start Budgeting

The 50/30/20 Rule

5 Simple Steps to Creating a Budget That Actually Works

Budget Definition

Budget for Multiple Financial Goals With the 50/15/5 Rule

Bite‑sized knowledgeto upgradeyour career

Your Complete Guide to Creating a Monthly Budget in 2020

A Monthly Budget For Your Money

The Envelope System

How to Create a Good Budget

Start Budgeting

The 50/30/20 Rule

5 Simple Steps to Creating a Budget That Actually Works

Budget Definition

Budget for Multiple Financial Goals With the 50/15/5 Rule

Bite‑sized knowledge
to upgrade
your career