Create Your Monthly Budget in 8 simple Steps

If you only had to name one, creating a monthly budget would undoubtedly be the most important thing to do in good stewardship of your money .

The problem is, you often think that managing your finances is too complicated. Tracking each of your expenses is still too often seen as a tedious and outdated exercise.

And if this could be the case at the time when doing your accounts consisted of listing on paper lines of bank statements and credit card receipts, know things have obviously changed a lot since.

A well-constructed monthly budget is essential to keep your spending on track , and to set aside even more money to meet your financial goals .

The hardest ? It’s only getting started!

If keeping track of your expenses seems “too complicated” to you, having to deal with unplanned financial emergencies can be much more annoying …

This is why I have broken down the process of creating a monthly budget for you into several easy to implement steps that I have presented to you in this article.

Pour yourself a coffee (or a glass of wine for the most stressed) , find a little quiet moment in your day, and you will end this article with a concrete solution to save daily costs .

Monthly budget: your finances’ best friend

The calculation of a monthly budget is the best way to regain control of your money .

To explain it simply, the budgeting is the construction of a map detailing how you will spend your money (it sounds more fun like that, right?). It is precisely this month-by-month spending plan that we call a monthly budget .

Your budget allows you to determine in advance whether you will have enough money to comfortably pay all of your bills, or to afford what you feel like buying. It therefore allows better management of impulse purchases and the amount of his bank account.

We talk about a monthly budget because it is the most used method and the easiest to manage. That is, you will be tracking your spending each month , while watching your progress over time and preparing ahead for planned spending later in the year.

Your monthly budget allows you to make your financial decisions well in advance, making it easier to cover your expenses throughout the year. The goal: to transform your finances and start putting more and more money aside.

Instead of seeing a budget as a constraint, it’s important to see it for what it really is: a valuable tool in achieving your financial goals .

What are the different types of monthly budgets, and which one to choose?

When it comes to managing your monthly budget, there are several support and tool solutions available to you.

Neither is fundamentally better than the other : it all depends on your preferences. However, it is important to be able to easily track all your expenses, otherwise your monthly budget could go down the drain.

Here are the most common tools, as well as some advantages and disadvantages of each of these methods:

The spreadsheet (Excel, Numbers, Google Sheets …)

Once you’ve built your table and entered formulas, it’s much easier than it looks to use a spreadsheet to track your monthly expenses.

Usually you just have to insert your cash inflows and outflows throughout the month , and the magic of Excel does the rest for you. The advantage is that you can easily make changes to suit your personal needs – as long as you have minimal knowledge of how spreadsheets work.

They also remain easily accessible on computer and mobile so you can dive into them whenever needed. It is often a good compromise for beginners who wish to put a minimum of hands in the dough.

Many websites offer pre-built spreadsheets to make your job easier. You can access our free monthly budget template at the bottom of this page.

  • Budgeting websites or apps

This is the option I prefer. Web or mobile budget management software are ideal for those who prefer a ready-made and very easy-to-use solution. No need to worry about complex formulas.

Personally, I have been using the Bankin ‘ app and the youneedabudget.com site (more commonly known as YNAB ) for over three years now. YNAB makes it easy to track expenses by following 4 “ golden rules ” to better manage your budget.

Even if you don’t plan to use YNAB as a budgeting solution, I still find their 4 principles very interesting to present. They remain relevant in the management of a personal budget, regardless of the tool you use

  • Give each of your euros a job. The heart of YNAB lies in this first rule. It’s about thinking about every euro you have in your bank accounts, and asking yourself: ” What should this money be used for?” “. Whether it’s paying your taxes or saving for your next vacation, giving every dollar a job helps you redefine your priorities.
  • Welcome your expenses with open arms . Imagine that a huge bill to pay arrives and… you pay it directly. Because you had already put aside little by little over the months. No fuss. This is the magic of the budget.
  • Learn to take punches. Sometimes life forces us to change our plans. New expenses are coming. No problem: you can of course change your budget. Because you will know exactly where each of your euros works.
  • Get your money old. To avoid the stress of your bank account being dangerously close to zero, you should spend the money you earned at least a month ago. That way, don’t panic in the event of the unexpected, and you can even set aside quietly for your emergency fund .

Among the other interesting budgeting solutions, you can find or even Bankin ‘ . It’s up to you to choose the one you prefer.

In any case, I strongly encourage you to take the paid versions of these tools . The free versions usually don’t allow you to customize the categories, which is really essential to keeping your budget on track.

The few dollars a month in fees is nothing compared to all the savings these platforms can save you in the long run.

For those who are interested in YNAB, you can click here to take advantage of a free month.

  • The monthly paper budget or ” Bullet Journal”

For those who prefer the authenticity of the physical to the virtual, it is quite possible to track your expenses in a journal or notebook . In these cases, just follow the steps that we will detail later in the article, except that the calculations will not be automated.

Even though it is more laborious, the advantage of the daily budget is that it is easier to keep track of all our expenses by having to calculate the amounts ourselves.

There are also some notebooks already set up to make your job easier and provide you with a more pleasant environment to track your expenses, invoices, etc. The most used are the Kakebos , originating from a popular Japanese technique of financial management.

I also recommend that you buy a journal dedicated only to your personal budget, which you can leave at home or take with you if necessary.

Which of these options works the best? Simply the one you will use. Do not hesitate to test, change, alternate different methods before deciding which one (or those) is best for you.

How to build your first monthly budget in 8 steps

Now is the time to get to the heart of the matter. Whichever method you choose above, these different steps will allow you to build a solid foundation for your brand new personal budget.

1. Calculate your monthly cash flow

The first step is to list all the cash flow that you receive each month .

This includes all types of income: net salary, additional salaries, scholarships, financial aid (CAF, APL), alimony, etc. The goal is to obtain the amount of money (fixed or approximate) that you receive each month. If this is just your salary, this is of course not a problem. The aim is to remain realistic.

2. Calculate your monthly mandatory expenses

Create a list of all the mandatory expenses you have each month . This includes all essential bills such as rent, utility bills (or water, electricity and gas bills), internet and cell phone bills, monthly subscriptions, bank charges, gyms… Overall, all your expenses except those related to leisure (including clothing) and savings.

Also list all the “compulsory” expenses whose amount is not fixed , but which you must nevertheless realize each month (such as gasoline or groceries). I personally prefer to separate these two types of expenses into separate categories (which I call “monthly bills” and “actual expenses”), but you don’t have to.

Here, don’t factor in one-off or annual expenses (like car repairs if you have to pay for them this month). We will talk about these categories later. You get an amount that represents your average monthly expenses, excluding leisure and clothing.

If you have chosen to follow your monthly budget through a web application or a spreadsheet, do not hesitate to modify or add categories to those offered to you to best reflect your actual expenses.

3. Subtract your expenses from your monthly income

Subtract the amount of your mandatory expenses from your monthly cash flow . The number you get should be positive (otherwise it means you are living beyond your means).

For example, if you earn € 1,772 each month and listed € 1,243 in mandatory expenses, you will get:

€ 1,772 – € 1,243 = € 529

The amount left over from this subtraction is the money you have on average available each month to save and spend on non-mandatory purchases (yes, in that order).

4. Create in your monthly budget a list of categories corresponding to each of your expenses

This time, we are talking about all your expenses, including leisure and annual expenses (think taxes, insurance, vacations…).

Make a list of each category in which you spend money each month and each year. As an example or inspiration, here are the different categories and sub-categories of my personal budget:

Monthly Bills & Actual Expenses

  • Rent
  • Electricity and Gas
  • Internet
  • Transport
  • Grocery shopping
  • Bank charges
  • Gasoline
  • Sports Hall
  • Netflix
  • Spotify
  • Cloud storage
  • Medical
  • Car park

What I Forgot to Budget For

  • Various Expenses
  • Clothing
  • Gifts
  • Apartment decoration
  • Eat outside
  • Have a drink
  • Just for fun
  • Beauty / Hairdresser

Upcoming expenses

  • Car repairs
  • Taxes
  • Home Insurance
  • Housing tax

For the Future (here, these categories will be replaced according to your own personal goals)

  • Moving abroad
  • Become a self-employed person
  • Emergency Fund
  • Invest
  • Vacation

I also have other sub-categories for my financial and savings goals. Of course, to each his own expenses, and therefore to each his own categories. Nothing is set in the rock. The goal is to adjust these categories as you go based on your actual spending . That’s why I always keep the category of “What I Forgot to Budget For” . I usually put in around 50 euros per month to plan for things that I might have forgotten to factor in my monthly budget.

5. Determine the amount you want to allocate to each category

By keeping the average salary you calculated above in mind, for each of the categories of your monthly budget, you will then determine the amount you want to allocate to them . It’s quite simple for monthly bills (if you pay € 19.99 for the internet, you just have to enter this amount). For expenses that can vary each month, you will have to try to guess at best the amount you think you will spend. Again, it’s okay if you get it wrong – you can then adjust down or up the following month.

For annual expenses, you will need to put enough money in each category every month to have the amount in cash when you pay. For example, if you will have to pay 70 € for technical inspection in 7 months, set aside 10 € each month for this category.

You’ll also need to do this work for your savings goals : How much do you want to set aside each month for each of your goals? Is it realistic to set aside € 30 per month with the goal of moving abroad in a year? What if you took $ 20 from the $ 60 you planned to spend on new clothes? It’s all a matter of priorities.

The key is not to forget to prioritize your savings goals. This means that you shouldn’t end up with a budget that only serves to pay your bills and fund your fun shopping. The following diagram can help you establish your priorities

6. Start tracking your spending through your chosen budgeting method

Set your deadline for the 1st of next month to start managing your brand new personal budget. At the start of the month, enter your income, and make sure that you will have enough to cover each of your categories (if you receive a salary of € 1,200 but have planned € 1,350 in expenses, adjustments will necessarily be necessary).

You will then list each expense as the month progresses. The goal is therefore not to exceed the amount you have just set in the previous step.

Some monthly budget apps allow you to automatically track your credit card expenses, and add them to the corresponding category. However, this is not the case for some tools.

Personally, I prefer to track and add my expenses manually. It’s a good way to “force” us to follow the state of our budget, and not realize 15 days later that we have completely over-spent in a category.

However, it is important to get into the habit of listing your purchases as quickly as possible so as not to fall too late. I have made a habit of entering my expenses as soon as I leave the store, but it is often necessary that I make some adjustments during the month (impossible not to forget to note certain purchases).

As long as you monitor your budget regularly enough, you have nothing to worry about. Just go to your bank’s website or app to verify that you’ve taken all the expenses into account.

7. Try to cut out some unnecessary monthly expenses

The advantage when we start to set up a monthly budget is that it is very easy to realize the unnecessary or superfluous expenses that we make on a daily basis.

These non-essential expenses such as subscriptions that you barely benefit from (magazines, etc.), overpriced subscriptions (typically overpriced internet or telephone plans) or overly high costs (such as bank charges) continue to drain permanently. your monthly budget.

And as the Latte Factor theory explains , it’s those expenses that really hurt you in the long run.

Removing or adjusting them will free up some money that you can put to better use.

8. Stay focused on your financial goals

Creating your first monthly budget is certainly a first step towards better financial education . But if you only use your budget to watch your spending without helping you get closer to your long-term goals, exercise becomes irrelevant.

You can “stay on budget” very well by spending € 150 per month on clothing and € 200 on meals out, if that’s what you planned for in those categories. But really ask yourself the question: “is this really what I want to do with my money?” ” .

What if you used that money to start your own business, retire earlier, invest in real estate, and increase your income? Wouldn’t you be happier?

The answer is yours.

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