How to Set a Monthly Budget

How to Set a Monthly Budget

April 1, 2020         Written By John H. Oldshue

Maintaining a budget is a crucial part of managing personal finances. You may know the importance of having a budget, but what goes into actually setting a budget? We’ll break it down step by step to help you manage your finances through every hurdle.

Step 1 – Know What You Earn after Taxes

If you have a fixed salary every month, this should be easy to calculate. If not, look at your average earnings across the last three to six months. Set a budget based on the lower end of your earnings. On higher-earning months, you can save the extra money or have it in the bank for lower-earning months.

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Step 2 – Write down Your Fixed Monthly Expenses, Including Due Dates

Write out every bill you have for the month, including the due date. Here is a quick list to get you started:

  • Mortgage or rent
  • Electricity, gas, water, sewer and other utilities (approximate on the high side)
  • Car payments
  • Health, car, and life insurance
  • Streaming services and monthly subscriptions
  • Credit card payments (write down the minimums and your goal payment to pay off debt)
  • Personal loans, including installment loans and rent-to-own furniture

Keep a separate list of expenses that occur once a year, once every six months, etc. Incorporate those into your monthly budget as needed. For instance, if you pay your car insurance in six-month intervals, make sure that bill is included for your January and July budgets.

Step 3 – Calculate Other Monthly Expenses, Such as Fuel and Groceries

Your bills aren’t the only costs you cover each month. Look back on the past several months to see how much you pay in the following categories:

  • Food (groceries and dining out)
  • Transportation costs (fuel, ride-sharing, subway fees, etc.)
  • Toiletries
  • Home improvement and home maintenance
  • Entertainment

Use high estimates to ensure you have enough in your budget to cover each cost.

Step 4 – Assign Bills and Expenses to Each Pay Period

Plan your budget based on how frequently you get paid. If you get paid every two weeks, determine which bills to pay at the beginning of the month and which bills to pay at the middle of the month. That is why writing out the due dates is so important. Establish how much you can spend on food, entertainment, fuel and other expenses each week or pay period.

Pro Tip: If you want to diligently save money, turn your savings into a monthly bill!

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Step 5 – Monitor Your Spending by Category

Keep track of your spending in each category, making sure you don’t exceed the parameters you set out. If you have $100 to spend on groceries for the week, don’t spend $150. You can manually keep track of this, or you can use an app to monitor your spending for you. Many banks and credit card companies offer these services within their apps.

Step 6 – Revise Your Budget Each Month until You Find the Right Fit

Your first budget may not be perfect. Feel free to make adjustments each month until you find a system that works well for you. Perhaps you need more money for food than you originally planned, or you don’t need as much for fuel as you thought. As long as your bills are paid and you are mindful of your spending, you should be in good shape.

Get Your Kids Involved with the Budget!

This is the perfect time to educate your children about money management. Let them see the planning process so they can learn how to budget. Explain terms like interest, credit, and savings. Depending on your child’s age, you may have him or her do some of the budgeting math with you. If your child earns an allowance, have him or her create a budget for saving and spending money. Use this opportunity to pave the way for a debt-free future for your children.



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The information contained within this article was accurate as of April 1, 2020. For up-to-date
information on any of the terms, cards or offers mentioned above, visit the issuer's website.


About John H. Oldshue

John Oldshue is the creator of He worked for over 15 years in television and won an Emmy award for his reporting. He covers credit card rate issues for
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