How to Make a Monthly Budget to Fit Your Lifestyle For Financial Independence

How to make a budget

It is very possible to be behind personal finance, if you don’t know how to make a monthly budget, to stay clear of this and be in better control of your money, you need to constantly put up a monthly budget.

Starting at first may be so difficult, but sincerely it worth trying to change your financial situation around, get yourself train on the positive impact of creating a budget than the negative it has.

Though it may require you to deny yourself something, the overall result is what brings a smile to your face at the end.

If you can sacrifice what it takes, you can make it work and make it sustainable enough to reach the next level of financial freedom you may be clamouring for.

The simple mathematical involve scare some people away from creating a budget, some don’t even see any value in creating it. 

Some hate the tighten rules of the budget created because they can’t spread their wings to buy as many things as they want. 

When you leave these entirely and stick to create a budget, it helps a lot than not having, though budgeting spread across time.

You go for any choosing period, most people make a monthly budget while some go for two or three months budgeting, whichever one you choose, stick with it to make it work.

 To create a successful budget and make it works there are six basic steps you need to know and they are very crucial, the principle here is to cut your expenses low, this means you are to be living beneath your means and increase your savings.

A budget can make it look like you are living extremely low to your standard, that is what a budget can do for you but don’t get scared, let’s go to see how you can create a monthly budget that suits your being.

The 6 steps to create a simple budget that fit-in, you can implement any one of these and make it work for you.

6 Steps To Creating a Budget

Like what was said earlier, setting up a budget requires some simple math from you and it deals with a specific time frame. (This means a budget expire over time). You can work with any period you are comfortable with.

Most people go for a monthly budget since most expenses recur every month, many love to stick with a monthly budget, you are not limited to just a monthly budget, you can go for two or more month at a go.

Here are the six basic steps to creating a successful budget:

1. Determine How many remainings Off Your Monthly income in the beginning

You need to know what is your monthly income, this is the total money that comes into your hands at the end of each month, after all, payroll deductions have been done – payroll deductions such as income taxes, health insurance premiums, or retirement saving contributions, you need to determine what is left of your income.

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With this, you will know what your income remaining for each month; this will guide you on who to plan your budget and what the limit of your budget should look like.

Why you need to determine this is to spend less each month than your net income.

If you have additional income sources, it could give more room to your budget and keep it alive, but it is not mandatory; you may include or may not want to add the income of your extra payments into your budget.

You may focus the extra income on investments or credit card debt relief.

2. Do An Analyze Of Your Expenses

Here you need a list of all your expenses and the best way to do this is by analyzing your monthly expenses for several months, this can be achieved through your checking accounts or credit card statements.

Separate your expenses into two categories, after getting the full detailed list of all your expenses.  

  • Fixed expenses.  These are expenses that are fixed every month and they include your house payment, car payment, certain utilities, insurance premiums, Cable TV/Internet and mobile phone, plus other monthly debt payments.
  • Variable expenses. These are expenses that deal with stuff like groceries, vacation, gasoline, car repairs, and restaurant meals expenses if there is a need for it.

When all these have been identified, you need to look in-depth for what you can work to lower either on your fixed expenses or variable expenses, identify the most time you can start with variable expenses because you have more control over it than the fixed expenses.

3. Choose a Budget System

There are three budget methods; you need to choose a budget plan that will work for you, you even decide not to follow any of these three methods, if you can craft something for yourself or you can make use of budgeting apps to make things easier for you. 

The budget system implemented can be tuned to your personal preferences. You may decide to dwell more on your savings goals over debt reduction. The aim here is to better your personal financial goals. 

4. Track Your Progress Going Forward

Since starting with a new budget could be difficult, if it is your first month. You never had any prior experience with a budget before now, it might look overwhelming and a lot of things have to change either in your diets, or other areas of your lifestyle to accommodate your new monthly budget rules.

Your goal here is to create extra room in your budget each month that leaves more money to be saved.

It is all about being able to reduce some certain figure each month, having extra money to save from your monthly expenses should be your focus. 

You can then put more money into a savings account or use it to lower your debts.

You need to track the rate at which the figure you can reduce on your monthly expenses is going forward, as it is very important to know how much money you have left, each month.

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The feedback can tell you whether your budget is working or not, creating a successful budget, means the extra money left over should grow at least a little each month.

5. Put Extra Money Toward its Intended Goal

As you are building up the surplus in the created budget for each month, if you don’t put it to the mean purpose of why you streaming down your lifestyle with the budget, you may be tempted to spend it.

Do some prioritization, don’t spend the funds, instead focus on either saving it or use for extra debt payment. The mean reason needs to be achieved.

Automation could help you put the money away into your saving account, investment account, or you can even set it automatic debit payments, without the need to see it, once automation has been done from a bank account into different channels that money are no longer consider to be part of your take-home pay again.

As your surplus money grows each month you could increase your automatic payments, if you like to do so.

Automation is best and it makes things easier for those who find it difficult to handle extra money in the past.

6. Make Adjustments in Your Budget as Needs Change

Budgeting is not a static something, it is a work in process thing.  Your way of doing your finances could change anytime, especially when your financial situation is improving for the best, you may likely want to make some modification to your budget.

The time you have to do some stuff in the past might not be there any longer, this helps you reduce cost on many things like an unused gym membership,  the ability to finally eliminate cable TV, or an increase the deductible on an insurance policy to lower the monthly premium are possibilities.

How To Make A Monthly Budget

A budget places you in a better chance to control your cash flow. It helps you reduce living, making you have more money to save or to use paying off some debt.

The normal way of peoples life is to earn a paycheck to help them foot bills and buy the thing they want, it is just natural, that is how humans think generally. 

This natural way of thinking leaves little to no money into planning for retirement savings, building an emergency fund, or cutting into that credit card debt, the natural flows make us spend all that we earn.

Budgeting comes as the solution that helps us combat the absence of a financial plan and stops this natural flow of spending.

Over time we began to be able to account for both income and expenses with the help of a budget and help us improve more.

Different types of budgets we have can help you create a budget of your own, you can go with the manual approach by simply writing down a list of your expenses and make decisions about what to cut costs and which costs can be eliminated.

Through the use of a notepad or Excel spreadsheets you can create a budget, some would like to go online budgeting apps instead of the manual method, some of the online platforms you can use are Mint, YNAB or Personal Capital.

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Common Types of Budget

There are several budget methods out there, but we only have three most common among others that you can stick with and they are listed below,

1. The Envelope System

This budgeting method has been around for decades, and it has its origins in paper envelopes.

The concept behind this method is placing cash into individual envelopes earmarked for each expense in your budget.

This system works best for those who find it difficult to control their spending in the past. 

Mostly it deals with having your cash at hand and distributes the money into individual envelopes of how you intend to spend, and then you can see the cash diminish as the month progresses.

This is old-style stuff but still more relevant in this age, this budgeting method has now been digitalized a budgeting app called Mvelopes that uses the envelope method — without the paper envelopes.

2. Zero-Based Budget

This method puts money in your budget into a specific category. It works by assigning a purpose of spending to every coin you have in each category.

To avoid irrational spending you’ll allocate a purpose for every money each month.

The money assigned each month is to cover living expenses. Every leftover money will be deliberately dispensed toward a financial goal — like saving money, investing or paying off debt. 

3. The 50-20-30 Budget

50-20-30 Budget is a money management method and it is very popular because it’s simple and effective. 

This method focuses more on the bigger picture instead of prying into the details of your everyday spending habits or analyzing your bank statement every weekend. It allocated your funds based on lay down rules.

How Does The 50-20-30 Budget Rule Work?

The allocation works like this:

  • 50 per cent of your after-tax income goes toward necessities — like housing, groceries, debt payments, transportation, insurance premiums, and other important and necessary expenses.
  • 20 per cent goes for savings and/or additional debt repayment 
  • 30 per cent is spent on “things you want” — these are things you don’t necessarily need but just want to have maybe spending money on clothing, entertainment, restaurant meals, and vacations.

The three common and popular methods have been talked about here,  choose anyone you fit comfortable with, and the best part is that you can make a switch from one to another, to find what works best for you.

Creating a budget has a lot of advantages than disadvantages, it is always good to work with a budget, don’t be lazy in creating one for yourself and if you have been lazy on this, get up, wake up from your sleep, if truly you want to have control over your financial situation.

Budgeting is one of the things that help you get to reach financial independence, you will never regret it if you drafting your monthly budget and putting it to work, you will be happy in the long run.

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