Creating a budget can help you make the most of your money.

  • Budgeting is one of the key foundational concepts of personal finance, but knowing how to create one is still a mystery for many people. Budgeting is often viewed as the equivalent of financial deprivation. If made properly, however, a budget can help you achieve financial freedom. If you’re a budgeting beginner, learning how to create a monthly spending plan is the first step in getting your finances under control.
  • Determine how much money you’re making each month. You can’t successfully create a budget if you don’t know how much you’ve got coming in. You should create a list of all the income you receive each month from all sources, including pay from your job, money you make from a side gig or hobby, child or spousal support, interest income, etc. If your income varies throughout the year, it may be easier to use your average monthly income as a starting point.
  • Make a list of all your basic monthly expenses, including rent or mortgage payments, car payment, utilities, groceries, gas, pet care, insurance, etc. Now, compare your total basic expenses with your total monthly income. If your income is higher than your expenses, you’re already off to a good start. If your basic expenses exceed your income, go over each one carefully to determine how you can reduce your costs.
  • Write down everything you spend on a daily basis. Not knowing where your money is actually going can be a major budget buster, and tracking your spending helps you to identify areas where you can cut costs. If you’re just getting started with budgeting, it’s recommended that you track your spending for at least a month or two to establish your spending patterns.
  • Add up any and all debts, including mortgage loans, car loans, credit cards, student loans and medical bills. Next, add up the minimum payments for your debts and how much you’re actually paying each month. If you’re only making minimum payments on your debts, you should go over each of your basic expenses to see if you can cut spending. Once you find extra money in your budget, you can use it to repay your debts more quickly.
  • Set aside some portion of your income each pay period specifically for savings. Building up an emergency fund of cash can protect you in the event of an unexpected expense or a temporary loss of income. Ideally, you should have anywhere from six to eight months of expenses saved. If your newly created budget is still a little tight, start off with $10 or $20 per week and increase your savings as you eliminate your debts.

Items you will need

  • List of monthly expenses
  • Most recent pay stubs or income statements
  • List of debts
  • Pen and paper or budgeting software



  • Don’t forget to leave room in your budget for some inexpensive fun. Creating a budget that’s too strict will leave you feeling deprived, which may actually lead to overspending

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