Tracking Your Cash: How to Make a Monthly Budget and Stick to It

Do you know how much you spend on coffee every month? Here’s everything you need to know about how to make a budget and stick to it.

Do you have all your bills coming due at once? Is there never enough to cover them all?

If you’re having to pick and choose between which bills to pay based on which is most overdue, then keep reading.

Creating a budget is actually pretty easy. Here’s how to make a budget and stick to it so you can get control of your finances.

Why Is Budgeting Important?

Some months you might be doing great. Your bills are automatic, so the payments come out of your checking account and you made enough at your job to cover those so you hardly notice them leaving. There’s even some left over after you buy groceries so that you can buy one or two extra things you’ve had your eye on.

But if every month is out of control and you don’t know what to pay first, then some organization and a budget can help you not feel so overwhelmed. Budgeting is important so that you can afford what you need to and take care of you and your family if emergencies come up.

We’ll show you how to create and manage a budget in the next section.

Creating A Budget

The first place to start is making a list of your monthly expenses. What bills do you know you have each month? Write down who you pay and how much you pay.

If it varies, be realistic about how much you think the very next bill will be. For example, you know the difference between heating bills in winter and summer, so you can choose a realistic amount for your budget this month based on the season you’re in.

Other bills that may vary each month are credit card bills (if you pay them off each month) or groceries. Make your best educated guess. You can always adjust later.

The next step is to list all the money you make. When you list out your income, make sure you list everything. If you have a side job or unofficial, cash-under-the-table type job, include it along with your full-time job.

How To Make A Budget and Stick To It

If you’ve gotten this far, we commend you. It can be stressful to look at the bills you have and be honest with yourself. It’s possible you’re even more frustrated now because you’ve realized you don’t have enough in the income column to cover all the expenses you listed.

Don’t worry, you can straighten out the budget. The goal is a zero-balance budget, which means that all the income is assigned somewhere and that all the bills get paid.

The first way to help yourself get a zero balance is to figure out what you can live without. Why not cut back on entertainment costs? Instead of going to the theater to see a movie, check it out from the library.

You can also cook at home more and eat out less, which will save on food costs. For more about how to save money and pinch pennies, read this article.

If you feel you’ve cut everything you possibly can, then it’s time to look at how to make more money. Are you able to get a second job, even for a short while to pay off some bills? While it may be hard work, you’ll be able to quit once some of the debt and bigger bills are gone.

What Is The 50 30 20 Rule?

You may have heard of this rule before, and if you’re worried you’re doing something wrong, here’s what it means. Some people recommend that you take half the money you see after taxes (net income, what actually gets deposited in the bank) and spend it on necessities. This would be food, housing, utilities, etc.

Then you play with a third of it (or 30%), like going out to eat, entertainment expenses on your budget. You could also include splurging on a shopping trip or traveling. The last 20% you use to plan for the future; invest it or put it in a retirement account.

These are guidelines that would be great to follow if you are able. If you can’t, though, don’t worry. Someday when you’ve worked out a budget and stuck to it long enough to pay off debt so you have extra money to work with, then you can try dividing your income that way.

Lowering Costs

In the meantime, the best way to help achieve a zero-balance budget, is to negotiate some of your costs. Talk to some banks about refinancing your mortgage to get the monthly payment lowered. Some debt consolidation places can help you put all your debts together so you only have one payment.

Pro Tip: Utility companies have budget plans you can look into. They take a look at your usage records and average out what you pay each month. Then they give you a fixed amount to pay each month, instead of varying the balance due based on your actual usage.

If you can’t meet the minimum payments on a bill, contact the company and let them know what you can pay. Many places will work with you, especially if you let them know that you intend to pay the whole amount. Don’t promise to pay more than you can afford, but do let them know what you can do and how much you intend to pay each month until the balance is gone.

How Strict Should I Be?

It’s important to stick to the budget so that you don’t wind up in the same position you were in when you started. Don’t make your budget system too complicated or it won’t work.

If pen and paper work best, then use them. Only try a fancy electronic method or app if it really is easiest for you.

But before you get really strict on the budget, it’s a good idea to put aside extra toward an emergency fund for incidentals and extra expenses you didn’t plan on. Then focus on reducing debt, paying more than the minimum monthly payment to get rid of those balances faster. Concentrate on one bill at a time.