How to Do a Monthly Budget

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How to Do a Monthly Budget

Five Parts:

Developing a monthly budget can help you get out of debt and build wealth. However, developing a budget is much easier than following it. If you want to get the maximum benefit from a budget, you'll have to practice some restraint and self-discipline to follow it.


Budgeting Help

Figuring Out What You Have

  1. Calculate your monthly income.As a rule of thumb, it's best to budget by the month.So, you'll need to determine your monthly income. Remember to look at your take-home income, that is, what you get if/after taxes have been taken out.
    • If you work hourly, multiply your hourly wage by the number of hours you work per week. If your schedule varies, use the minimum number of hours you work per week instead of the maximum. Multiply your approximate weekly wage by four to come up with an approximate monthly wage.
    • If you work salary, divide your yearly net salary by 12 to determine approximately how much money you make per month.
    • If you get paid biweekly, base the monthly budget off of 2 paychecks, because that's all the money that will usually come in per month. This is especially helpful if your budget is tight, then twice a year you'll get bonus paychecks to put towards savings.
    • If you work odd jobs and have an irregular income, average out the last 6 to 12 months of recurring income. Use this average to build a monthly budget, or choose the lowest monthly amount to provide yourself with a worst-case scenario.
    • For example, if your monthly salary is ,800 then that's your core income.
    • Again, you have to adjust this amount for taxes. Only list your income as your actual take-home pay.
  2. Factor in other sources of income.Other income includes any money you receive regularly that you do not work for, such as alimony.
    • For example, if you earn 0 per month for work that you do apart from your job, then your total income is ,800 + 0 or ,000.
  3. Skip bonuses, overtime, and non-recurring income.If you cannot rely on receiving the money during any given month, do not factor it into your monthly budget.
    • The good news is that, if you do receive that additional income, it will be "gravy." That is, it will be money that you can spend (or, better yet, save) that you hadn't accounted for.

Part 1 Quiz

If you work salary, how do you determine your monthly income?

Determining Your Expenses

  1. Calculate your total monthly debt payments.One of the keys to successful budgeting is to properly track your expenses.That includes debt payments as well as other expenses. Find out how much you spend per month on car loans, mortgage, rent, credit cards, student loans, and any other form of debt. Mark down each figure separately, but also total the figures together to determine how much you owe.
    • For example, your monthly debt payoff might include the following: a 0 car payment, a 0 mortgage, and 0 in credit card payments. That's a total of ,200 in monthly expenses.
  2. Keep track of your monthly insurance payments.These payments typically include whatever you spend each month on renter's, homeowner's, car, other motor vehicle, health, and life insurance.
    • For example, your monthly insurance expenses might include the following: 0 for car insurance and 0 for health insurance. That's a total of 0 in monthly insurance expenses.
  3. Average your monthly utilities.Utilities include any monthly service you pay someone else to provide, and usually cover bills for water, electric, gas, phone, Internet service, cable, and satellite. Gather your receipts and past bills from the last year to come up with an average monthly estimate for each utility, and add the averages together.
    • For example, your monthly utility expenses might include: 0 for water and 0 for electricity. That's a total of 0 in monthly utility expenses.
  4. Determine your average monthly grocery bill.Look over your grocery receipts from the past few months to determine how much you typically spend each month.
    • For example, your average monthly grocery expenses might be ,000.
  5. Look at your past cash withdrawals.Dig into ATM receipts and bank statements to determine how much you typically withdraw each month. Of this, determine how much was spent on necessity versus want.
    • If you kept all your receipts from the past month, look through them and calculate how much you spent on things you needed—gasoline, food, and so on. Subtract this amount from your total monthly cash withdrawal to determine how much you spent on things you merely wanted—a new video game, a name brand bag, and so on.
    • If you did not keep your receipts, do your best to provide an estimate based on memory.
    • For example, if you withdraw 0 per month at an ATM, and you spend 0 of it on groceries, then you'd subtract that 0 from the 0 total because you've already accounted for your grocery expense. That brings your net ATM withdrawals to 0 per month.
  6. Figure in special expenses.Special expenses do not recur every month, but they do recur often enough for you to anticipate them coming. Examples include holiday gifts, birthday gifts, vacations, and repairs or replacements you anticipate paying for in the near future. Determine how many special expenses you plan on encountering for each month, from January right through December.
    • For example, you might anticipate 0 per month in car maintenance.

Part 2 Quiz

What should you include in your expenses?

Mapping It Out

  1. Decide how you want to keep track of your budget.You can use a pencil and paper, standard spreadsheet software, or specialized budget software. Software may make it easier to calculate and alter as necessary, but you may also find it convenient to write your budget out and keep it by your checkbook or credit card to serve as a constant reminder.
    • One of the best things about using software, such as a spreadsheet, to map out your budget is that you can play "what if." In other words, you can see what would happen to your budget if your monthly mortgage increased per month by just plugging the new number into your "Mortgage" value. The software should tally everything up immediately and give you an idea of how much of a dent that increase would put in your discretionary spending.
    • Bank of America offers a spreadsheet template that you can download for free.
  2. Organize your budget.Separate your budget into two basic sections: income and expenses. Fill in each section with the information as you calculated it above, marking down a separate entry for each individual source of income as well as each expense.
    • Calculate two totals for the "income" section. For the first, add together all the new income you bring in each month. For the second, add everything together, including the money you have saved in accounts.
    • Calculate three totals for the "expenses" section. For the first, add together your fixed expenses, including debt payments. Fixed expenses are also considered essential or necessities, even though some, like food, vary each month. Generally, a person doesn't have a lot of leeway in these expenses.
    • For the second, add together variable or nonessential expenses where you have some control over the amount spent, such as eating out or entertainment.
    • For the third, calculate your total expenses by adding together the two other categories.
  3. Subtract your total expenses from your new income.In order to save money, you must have a positive difference. In order to break even, the two totals must balance each other out.
    • For example, if your total expenses are ,300 per month and your monthly income is ,000 per month, then the difference is ,000 - ,300 or 0 per month.
  4. Make alterations.If you subtract your total expenses from your new income and come up with a negative difference, go into your alterable expenses and make adjustments. Non-necessities, such as games and clothes, are the easiest amounts to subtract from. Keep altering until you come up with an amount that allows you to either break even or save money.
    • Ideally, your income should exceed your expenses and not just break even. There will always be expenses that you didn't account for. That's just an immutable law of the universe.
  5. Try not to allow your total expenses to exceed your total income.Occasionally exceeding your new income only means that your savings will dwindle. While you can do so from time to time if needed, you should not make a monthly habit of it. Your total income, however, also includes your savings, so if you exceed it, you will go into debt.
  6. Keep a hard copy of your budget.Place it near your checkbook or in a special file folder kept for budgeting purposes. An electronic copy is good to have, as well, but a hard copy will remain even if something nefarious happens to your computer and erases the file.

Part 3 Quiz

What should you include in the "Income" section of your budget?

Making Adjustments

  1. Review your budget regularly.While you keep track of your budget through the months, you should review and revise your budget occasionally. Diligently track income and expenses for at least 30-60 days (longer if income or expense have large variances from month to month) so you can see any changes and make adjustments accurately. Compare your actual spending to your budgeted spending. Look for any expenses that are increasing month-to-month and try to curb these increases if you can.
  2. Adjust your budget for savings or life changes.There will come a point where you need to save for a large purchase or make changes to account for an unexpected life event. When this happens, start back at the beginning and look for ways to work the new expenses or required amount of saving into your budget.
  3. Be realistic.Making alterations is an important part of budgeting, but you can only expect to alter so much. Even if you plan on only spending money on the absolute bare necessities, the prices for many of these necessities—such as gas and food—fluctuate in ways that you may not be able to anticipate while preparing your budget. Always leave room for these fluctuations and don't make savings goals that cut your budget too closely.

Part 4 Quiz

True or False: Your budget should leave room for alterations and fluctuations.

Community Q&A

  • Question
    Where can I find a personal budget form that I can use every month?
    Top Answerer
    There are many useful budgeting tools online. One is at where you can search for "household budget worksheet."
  • Question
    Should I divide annual car and homeowners insurance into monthly payments?
    Top Answerer
    Yes. Even if you don't pay them monthly, it's good to budget for them monthly.
  • Question
    Where do I list the money that I made over the amount of my budget?
    wikiHow Contributor
    Community Answer
    Any money that you make in a month is listed as your total income for that month. You can list this income as "additional income" or under a more specific title but it still goes towards your total income for the month.
  • Question
    Are there any software templates that have been adapted for Australian use?
    wikiHow Contributor
    Community Answer
    Most budgeting software (except for those that include tax calculations) is standardized enough to be applicable to almost any country or situation.
  • Question
    How do I budget for something if I only have to pay it once a month, but I want to set aside money every month?
    wikiHow Contributor
    Community Answer
    Open up a savings account. Divide the amount you pay once a year by 12, and each month put that amount in the savings account. This way, when it's time to pay, you'll have the full amount in your account.
  • Question
    How can I estimate utility costs for a budget?
    wikiHow Contributor
    Community Answer
    You can either average your monthly utility costs over the past year or adjust your estimate monthly for seasonal conditions. For example, you could adjust your estimate higher in the winter for heating costs.
Unanswered Questions
  • How do I create a monthly budget when expenses are past due?
  • Can you provide a sample budget?
  • How do I live on a monthly budget of 00?
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Quick Summary

To do a monthly budget, start by calculating your monthly income and fixed expenses, like your rent, debt payments, and groceries. Enter this data into a spreadsheet to keep yourself organized, and use receipts or bank statements to figure out how much you usually spend. Then, calculate your other monthly expenditures, like the amount you spend on entertainment. Subtract your expenses from your income to see how much money you have left over each month. If you don't have any money left over, you'll need to cut expenses or increase your income if you plan to save.

Did this summary help you?
  • It's better to overestimate expenses and underestimate income. People tend to do the opposite out of optimism.


  • Do not allow yourself to dig into your savings too often. Doing so every once in a while is acceptable and bound to happen, especially as emergencies and unforeseen expenses come up. If you plan on doing so too often, however, your savings will dwindle rather quickly.

Things You'll Need

  • Pencil
  • Paper ledger
  • Spreadsheet software
  • Budgeting software
  • Receipts and other past financial statements

Related wikiHows

Sources and Citations

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