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How to Create a Monthly Budget

use a budget spreadsheet to determining where your money is going each month.

If you are going to put the family in the car and drive from California and New York, you will most likely need a roadmap from point A to point B. Otherwise, you will get lost and perhaps put your family in jeopardy. Why would you not view your finances in a similar manner? Every month, you have a limited amount of income, though the amount might vary from month to month. You also have certain expenditures that you know you will need to pay. Doesn’t it make sense that you would want to start each month by comparing your anticipated income versus expenses? It’s the only way you will know for sure whether or not you are going to be able to properly meet your obligations. To be clear, you need to do this comparison before the beginning of the month in question. There is not much you can do about any shortfalls during the month or after the month is over. It’s a shame high schools and even colleges don’t teach people how to prepare simple monthly budgets. It’s alarming that so many adults have no idea how to use certain tools to help them manage their finances. To that end, the following information is going to focus on a six-step process related to how to prepare a proper monthly budget. Note: this how-to process is applicable for both individual households and businesses. We also want to share with you how our free budget tools can make the budgeting process easier.

1. Gather Documents and Paperwork

Preparing a monthly budget requires a bit of focus. Instead of trying to prepare your budget on the fly, you should first gather all pertinent documents and organize them into three groups. The three groups should be income-related documents, expense related documents, and miscellaneous documents that contain information that may or may not affect your budget. Here’s of a list of documents you might want to gather:

  • Bank statements from prior month
  • Investment account statements from prior month
  • Most recent pay-stub
  • Most recent mortgage statement
  • Most recent car payment statements
  • Most recent utility bills
  • Most recent insurance bills
  • Documents related to anything else you think might impact your budget

Once you have your documentation, it’s time to sit down at a desk or table and start laying things out in black in white. You can do this with a pencil and paper, or you might want to use our free budget tools, which include a budget planner, worksheet, and a calculator. When done, you definitely want a hard copy of your budget for quick reference.

2. List Income and Cash Resources

Don’t worry about the fact you only have a source or two of income to include in your budget. The quantity of incomeresources does not matter. What you need is the amount of income you anticipate receiving during the month from all potential resources. Your monthly wages will probably be your largest source of income. Other potential sources might include investment income, child support, Social Security income, and or self-employment income. If any sources of income vary from one month to the next, it’s appropriate to calculate (use our budget calculator) an anticipated amount by averaging the amount based on the amount you received during the prior three months.

3. List Out Fixed Expenses

Your fixed monthly expenses will be the easiest expenses for you to determine. These are the bills that show up in your mailbox or email each month whether you want them or not. Fixed expenses refer to expenses that do not change from one month to the next. The most common fixed expenses the average individual needs to account for would include the mortgage bill, car payment, student loan payments, and insurance payments (auto, homeowners, healthcare).

4. List Out Variable Expenses

Next up, you will want to list out your variable expenses. These are expenses that are either intermittent (don’t come every month) or vary in amount from one month to the next. If the amount tends to vary materially from one month to the next, you can take the prior three months and calculate an average monthly amount. Your variable expenses should include utility bills (electric, gas, water, cell phone), groceries, auto repair expenses, clothing, childcare, transportation costs, and entertainment expenses, including eating out.

5. Subtract Expenses From Income

After you have accumulated the income at the top of your worksheet with the expenses listed at the bottom, all you need to do is subtract the expenses from the income. The number you get from this basic calculation will be your net remaining cash or excess income. If the number is negative, you have a cash deficit and a potential problem.

6. Make Final Adjustments

After determining your final cash position for the month, you might need or want to make final adjustments. For instance, you might want to address a deficit by showing a line item that represents pulling money out of savings to cover the deficit. You might also want to lower a surplus by budgeting to put money into savings/investment or to add a special expense (think vacation), which might become more relevant because you anticipate ending up with extra cash.

How to Use Your Budget

After you have established your monthly budget, it doesn’t go in the top drawer of your desk. This is a working document. You need to use it to guide your financial decision making during the month. Here’s a great example to represent the importance of your budget: Let’s assume your budget for April indicates you have very little room to vary away from your budget. In other words, you need to manage your expenses closely to keep from creating an unexpected deficit. If you have budgeted $200 for groceries, that’s more then a target amount. It’s all you have to spend on groceries unless you can come up with additional income. If you overspend in the grocery category, you might have to cut back on entertainment expenses to stay within your budget. That’s how the budget process works. The example should make clear that having a monthly budget enhances your ability to make quick spending decisions during the month. Over time, you will begin to realize that preparing and adhering to a monthly budget with turn you into a fiscally responsible individual. That’s a good thing because you will likely create a level of financial stability that relieves you from having to worry about much money all the time.

Budgeting Tools

Budgeting is an important process. That’s why companies like ours promote our free budget planner, worksheet, and expense calculator. This budgeting tool will allow you to create your monthly budget and make actual versus budgetcomparisons quickly and efficiently. If something goes awry and your budget calculations exceed or fall short of expectations, our free budget calculator has a function that will allow you to make intermittent adjustments. Once you become proficient with your free budgeting tools, you will find it easy to make adjustments every day with little effort. That would allow you to go to sleep at night every night without having to worry about your finances. At a minimum, you should make your budget comparisons at least once a week. If you are serious about managing your finances properly for the best results, you need to prepare a monthly budget. If you are going to prepare a monthly budget, our free budgetplanner, budget worksheet, and calculator are must-have tools.


What is monthly budget planning?

First of all, spending habits, are the best habits. Businesses should know the significance of financial planning, as it is a process that helps you identify priorities, set goals, and make decisions. Therefore, the budget is a financial planning tool, a map that helps you achieve those financial goals. When it comes to budget, there will be the necessary financial rigor to ensure that there is a balance between expenditure and revenue. In basic terms, the monthly budget planner regulates savings and expenditures. It helps to manage income well without people getting into debt. It avoids unnecessary expenses and helps to achieve the financial goals already stated. Moreover, this will help people to enjoy its financial freedom.

What are basic monthly expenses?

Before anything else, monthly income, which usually comes in the form of payrolls or salaries, will be allocated. From this, the fixed expenses that arrive each month, such as the mortgage, the car loan, the community, or the children’s school, to name a few examples, will be deducted. This actual expense should be added in a monthly budget worksheet, It can always be the same amount, like the car’s handwriting, or be variable, as the credit card receipt. Furthermore, we can not forget other necessary monthly expenses named before, such as food, taxes, electricity/water/telephone bills, house rent/mortgage loan, weekend/holiday expenses, travel expenses, etc. Having an emergency fund will be essential for the unexpected expenses that often appear. It is crucial to have a spending plan and continually review this expense tracker to know if you are on the right track.

What is a reasonable budget?

Money management is a fundamental process of monthly expense tracker, investing, banking, budgeting, and more. With regards to a reasonable budget, it must adequately fulfill the functions expected of it; it is indispensable to base it on certain conditions that must be observed in its structure, such as knowledge of the company; coordination for the execution of a budget plan or policy; setting a budget period; direction and monitoring; management support. The budgetary process does not only involve the calculation of sums. We could say that it is an integrated system where particular attention is pay to set objectives based on which the different activities that an administration can carry out are plan and control. Consequently, the entrepreneur must use a budget as a planning and control tool must consider some stages in its preparation, whether if its starting or if the system is now implemented.

Does excel have a budget template?

If someone is looking for a budget template to keep track of their personal or business finances, a budget spreadsheettemplate will help to monitor expenses accurately. There are a wide variety of budget templates available-ideally, a budgettemplate in Excel. Excel is a program that is highly standardized in the business environment. One can open it on virtually all computers, thus eliminating compatibility issues. This reason, added to the calculation facilities offered by its tables, makes Excel a perfect platform to present quotes to customers. An example might be a family budget template, as it can track monthly income, expenses, and cash flow and present the information visually. They also cover budgets for homes, weddings, businesses, events, and studies-a family budget template.

What is the 70 20 10 rule money?

It is a rule made to help know how to spend money and save it in a responsible way. This rule notes that there are tangible and immediate objects and services needed to cover and satisfy the present, but there are also those to ensure stability in the future. The 70-20-10 rule starts with 70% of the money earned goes specifically to necessary expenses, such as bills, utilities, food, and transportation. Next, 20% goes directly into savings, for use as plans, emergency funds, pensions, and short-term contingencies such as accidents. And lastly, 10% of the salary would go to debts to pay. The most critical debts have to be the priority since clearly not all the debts are equal, anyway, 10% has to cover all the debts. Saving is required, and many people find it difficult in several cases, but still, if possible, and even more for short and long-term goals. Following and applying this rule, we will save more than usual and have more money for the budget to get our ideas straight.