How To Make A Monthly Budget

Calculator How To Make A Monthly BudgetSo now the real fun begins. We are going to learn how to make a monthly budget. If you’ve completed the previous step, The Pre-Budget Reality Check, this will be a piece of cake because you already have all of the information, it’s simply about organizing it. So, if you haven’t done so already, I recommend you visit that page first.

Click here for the Pre-Budget Reality Check!

There are many different tools we can use to put together a budget. Some people like to just do it on a sheet of paper each month, while others, including myself, like to build their very own spreadsheet budget that they can quickly edit on the fly. There are also some great budgeting apps out there as well that we will cover in the future.

But for today, we are going to just do it on an old fashioned sheet of paper.

We are going to break it down into 6 small categories to simplify our budget and keep it well organized. Organization and simplicity are both critical to being able to understand and properly execute our plan.

Remember, if it takes a person with a masters degree in calculus to understand our budget, it’s probably not going to work and we are far less likely to stick with it!


So the first category we are going to want to create is our income. We want to place this somewhere at the top of the page. I personally recommend the top left.

If you have multiple sources you will want to include all of them, yet, keep them on separate lines. That way you can make some decisions on where you need to increase to help balance your budget. Go ahead and tally up all of your sources of income and create a total line. It should look something like this:

  • John Paycheck 1 –
  • John Paycheck 2 –
  • Jane Paycheck 1 –
  • Jane Paycheck 2 –
  • Extra Income –

ALWAYS, leave a space for additional/extra income. It’ll push and motivate you to look for ways to maximize your income and take your battle to the next level!

Click here for ways to maximize your income!


We will start with our giving and our savings. These items will have more money added to them in the future.

You may notice that for our sample couple I don’t even include this category. The reason being is their situation is such a mess they can’t even begin to think about these things at this stage in the battle.

Most people desperately want to save and give. I’m a huge supporter of both of these practices. If you have some money to place in this section that’s fantastic. However, Most people don’t when they first start out. If you want to place them in your first budget, do so right after your income section. We will certainly add to them later.

  • Giving –
  • Savings –


The next category we want to create is our critical needs column. Yes, I said our needs. This does not include our cable, the internet, or our spa treatments and gym memberships. This is basic needs that we have to have based on our current living situation.

  • Rent/Mortgage –
  • Electric Bill –
  • Water Bill –
  • Gas Bill –
  • Sewer/Trash Bill –
  • Phone/Cell Phone –
  • Childcare –
  • Food and other Living Expenses –
  • Auto Insurance (If paid monthly) –


Our next category is going to be for our planned expenses. This is all of our annual, semi-annual and quarterly expenses. Write down the amount we need to set aside each month to make sure we don’t get any unexpected surprises. Remember, this is our battle plan. We need to always be thinking and planning ahead.

So we take our total amount due for each expense and divide it by 12. (Or 6 if paid semi-annually, 3 if quarterly, etc.) So, for example, if I pay $2100 a year in property taxes, then I divide that by 12 and put $175 in for my monthly budget to set aside for it.Car Maintenance How To Make A Monthly Budget

  • Property Taxes –
  • Auto Insurance (If not paid monthly) –
  • Home Owners/Renters Insurance (If not paid monthly) –
  • Car Maintenance (A general estimate for oil changes, tires, etc.) –
  • Holiday/Birthday Shopping –
  • Prescriptions (If you are on long-term medication prescriptions) –
  • Medical Bills (Ongoing medical expenses or if you are planning for a procedure) –
  • Vacation Planning –


The next category is going to be for all of our debt. This comes before the fun stuff and entertainment. Remember, the main goal is to knock out our debt as fast as we can so that we can actually enjoy and be able to afford the fun stuff and not have the stress of trying to pay for it later.

Ultimately we want to organize our debts in the order we want to pay them off.  So, if we are going with the snowball method we would put the lowest balance first, then the 2nd lowest balance, so on and so forth. If we are going with the avalanche method we would put the highest interest debt first, then the 2nd highest interest, so on and so forth.

But if this is your first budget, you may just want to jot them all down and figure that part out a little later. Right now we are just trying to understand and get a handle on where our money is going and get a plan going forward. Here are the items we want to include in this category:

  • Collections (If on a monthly repayment plan) –
  • Medical Bills (If on a monthly repayment plan) –
  • 401(k) or 403(b) Loans –
  • Credit Cards –
  • Auto Loans/Leases –
  • Lines of Credit –
  • Personal Loans –
  • Student Loans –
  • Tax Liens –

What debt should I pay off first?  Click here to find out!


Our final category is going to be for our entertainment and extras. This is where our cable, our internet, premium entertainment, extras, and perhaps eating out or date nights will go. This is also the first category that we will look at when we start to cut some things out.

  • Cable –
  • Internet –
  • Premium Entertainment (Netflix, Hulu, Spotify, Pandora, etc.) –
  • Eating Out/Date Night –
  • Anything extra (Gym memberships, etc) –

Paper Budget How To Make A Monthly BudgetTHE GRAND TOTAL

Now that we have a sub-total for all of our categories it’s time for us to calculate our final total. If you have already completed the Pre-Budget Reality Check exercise then you probably already know what this is going to look like, but it’s important to take a look in an organized format so we can begin to make changes to help balance it. So, basically, you take your total income and subtract the total of your other categories. The total should be zero.


As I’ve mentioned before, if this is your first time doing a budget or if you haven’t looked at yours in awhile it’s not going to balance. It’s not going to be zero. Our sample couple is in the hole almost $1000 every month! (We are going to help them find ways to fix it.)

If you have a positive number after you calculated your grand total that simply means you have more to put towards debt and you are off to a great start! However, that’s almost never the case, especially if you are hurting by your debt payments. So, let’s look at some practical tips to help bring that budget into a proper balance.

Click here to check out some Budgeting Money Tips to help you balance your budget.

Did you enjoy creating your first budget? Did you hate it? How close were you to balancing? I’d love to hear in the comment section below!

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