5 min read
How to Budget: How to Make a Monthly Budget
-
-
Copied link to Clipboard!
Making the most of your money isn’t always easy these days. Chances are you’re getting hit with expenses from all sides, which can be stressful if you don’t have a lot of money to go around. Regardless of how much money you make or what you’re looking to do with it, it’s always a good idea to learn how to budget. This will help you better manage your finances, so you can prepare for the unexpected.
Lesson Notes:
- Create a list of all of your income and expenses.
- Use budgeting systems to categorize your income and expenses and to help you determine how much you should budget for each category.
- Use spreadsheets, calculators and digital tools to help put your budget into action.
LESSON CONTENTS
Making Sense of Your Finances
Start with Income
Start by calculating how much money you make per month. If your income varies, use your total income from last year and divide it by 12 to estimate your average monthly take-home pay.
For many people, this means multiplying their weekly paycheck by four, but considering over a third of Americans work on a freelance or per diem basis, you may have to do some math.
Add all your income together, including your main job, side gigs, gifts, and don’t forget to deduct any business-related expenses, such as equipment, inventory, and other costs that affect take-home pay.
What About Taxes?
If you are a W-2 employee, taxes are likely taken out of your paycheck automatically. This usually means you won’t have to pay a large fee in the spring when you file with the IRS.
If you work freelance or get paid in cash, set aside around 25% of your monthly income for taxes. Check how much you paid in taxes last year to get a better idea of how much you will owe.
Bills and Expenses
Once you have your monthly income squared away, deduct all your required monthly expenses, including housing, food, water, clothing, transportation, internet, cell phone, utilities, insurance premiums, healthcare, loan repayments and anything else you need to pay for regularly.
This will leave you with what’s known as disposable income. If your monthly income isn’t enough to cover all your regular expenses, consider taking on a part-time job, looking for a higher-paying job or lowering your living expenses.
Some ideas include living with a roommate, moving back home with your parents or family members, taking public transportation instead of a car, moving to a smaller apartment or house and reducing your monthly car, student loan, credit card debt or mortgage payments.
How Much Do I Need to Save?
As a rule of thumb, experts recommend having at least three to six months of expenses stashed away in an emergency fund, but you can always save more. If you don’t have anything in savings, now’s the time to get started.
When setting a budgeting plan, it all depends on how quickly you want to reach your goals.
The Zero-Based Budget
If you are committed to getting out of debt (link to How to Get Out of Debt article), enrolling in college or buying a car or a house, you might take the zero-based budget approach. This means spending as little as possible every month and squeezing every penny. Every purchase should go to a meaningful cause, such as your basic necessities or savings.
Of course, getting rid of all non-essential purchases isn’t easy. You’d have to cook every meal at home, bring a lunch to work, and stop going to bars, restaurants, concerts and the movies. You can still enjoy in-home entertainment for just a few dollars a month, see your friends without spending money and eat good food if you know your way around the kitchen.
The zero-based budget will help you reach your financial goals as quickly as possible. Every penny will go into savings, so you can pay off your debt, make a major life purchase or go back to school.
The 50/30/20 Budget
If you like to enjoy the occasional night on the town or indulge in your everyday wants and desires, you can always go with the popular 50/30/20 budgeting plan. This breaks down as:
Spending 50% of your income on basic necessities, 30% on impulses and non-essential purchases and 20% toward savings and debt payments above the minimum.
This should leave you plenty of money to have a life outside of work and home. It’s also important to remember that you don’t always have to spend money to have fun. If you’re looking to change your lifestyle, look for low-cost alternatives to going to the movies, eating out or buying clothes at trendy stores.
These numbers are just rough estimates, consider moving them around to suit your everyday lifestyle. Try to limit your essential purchases to just 50% of your income. If you’re spending over 50% on housing, food, transportation and basic utilities, you won’t have a lot left over for savings.
Putting Your Budget into Action
Learning how to budget is only half the battle. It’s nice to have these estimates as references but following through on your goals isn’t always easy.
There are dozens of ways to put your budgeting plan into action so that a certain amount goes into savings every month. If you work for tips or bring home cash, you can physically separate your money into envelopes for different spending categories.
Digital banking tools have made tracking your expenses so much easier, such as spending trackers and spending category charts. Many financial institutions also provide free financial calculators to help you set up your budget and stay on track. If you need help putting money aside into savings, banks or credit unions will often automatically divert an amount you request to your savings account. This automatic approach will help you build a rainy-day fund.
You can use your online banking system to analyze your spending history. The bank or credit union should be able to tell you how much you tend to deposit and spend every month. Use this information to get a better sense of your lifestyle and how these expenses are affecting your finances.
There’s also the old budget spreadsheet method for itemizing your expenses. Excel will automatically calculate the totals, so you don’t have to break out a calculator.
You can also consult an accountant, financial planner or financial coach. This is a great option for those with multiple sources of income, changing business expenses, or complicated finances. You don’t have to manage your money on your own. Consider working with a professional to get your budget off the ground.
Whichever approach you take to budgeting, create caps on your monthly spending to help you better manage your money. It’s easy to lose sight of your financial goals when you’re focused on work and your personal life, which is why it is important to create a system to stay on track.
As you can see, learning how to budget is all about understanding your finances and setting the right goals. Consider where you see yourself in five years and what kind of life you want to lead. Use this guide to make the most of your money, so it doesn’t end up going to waste.
Related Resources
View All
10 min read
A Football Fan’s Guide to Budgeting for Game Day
Football, friends, and food are a winning trio, but without a game plan, the bill can tackle your wallet before the first snap. This guide turns tips for creating a budget-friendly game day party into an action-packed playbook so you can savor every touchdown without fumbling your finances.
10 min read
5 Rookie Money Mistakes (And How to Avoid Them)
Have you ever had an unexpected bill wipe out your good intentions, or caught yourself wondering, “What should I do with my money?” You’re not alone. Late-night searches for money advice can leave anyone confused. One blog tells you to skip the lattes, while another pushes a cryptocurrency side hustle. Instead of adding to the noise, this guide breaks down five of the most common money mistakes and, more importantly, how to sidestep them.
12 min read
How to Budget as a College Student
Every semester delivers the same double punch: a tuition bill larger than last term and a flood of incidental costs — textbooks, lab fees, late-night pizzas — that evaporate paychecks and loan disbursements at dizzying speed. The average college student spends $38,270 per year on tuition, books, supplies, and daily living expenses. In a private campus, that bill rises to $58,628 (Hanson, 2025). When numbers grow that large, hoping for the best is not a plan; a written budget is. This guide offers a practical roadmap for how to budget as a college student—from mapping cash flows, choosing tracking tools, and cutting expenses without trimming the joy out of campus life.
5 min read
How to Start Saving Money: Clever & Easy Steps
If you vowed this is the year you get ahead financially only to watch payday deposits disappear, you’re not alone. Gillespie (2025) notes that 59% of Americans still can’t cover a $1,000 emergency without borrowing or selling something. Meanwhile, the U.S. personal-saving rate is languishing below 4 percent—about half its long-term average (BEA, 2025). These sobering numbers explain why learning how to start saving is so critical. The encouraging news? A few clever ways to save money can transform vague intentions into steady progress.
6 min read
How Can I Save Money? Here Are 10 Easy Tips
How can I save money? Picture your money as water flowing through a series of channels. Some streams nourish long-term goals, others evaporate into impulse buys, and a few leak through cracks you never noticed. Redirecting enough of that flow toward the bucket that matters most — savings for emergencies and retirement — guarantees long-term security. Savings protect your future. Yet the typical American household saves just 3.9 % of disposable income as of March 2025, roughly half the pre-pandemic norm (St. Louis Fed, 2025). The good news is that small, deliberate changes can double or triple that rate without feeling like deprivation.
Below, you’ll find proven, beginner-friendly money saving strategies you can start on today. By the end, you’ll have a clear map of ways to save money, from the daily latte decision to bigger moves like automating transfers or picking a side hustle.
10 min read
Summer Vacation Ideas on a Budget
Rising airfares or tight budgets don’t have to cancel summer fun. A thoughtfully planned summer vacation on a budget can restore energy, create memories, and leave room in the checking account for next semester’s textbooks or an unexpected flat tire. Let’s nail down the numbers and map out low-cost destinations and close-to-home adventures. We also outline painless saving tricks and digital tools that track every dollar and make family summer vacation ideas on a budget a practical reality.
10 min read
How to Become Financially Independent
Financial independence (FI) isn’t a distant fantasy reserved for trust-fund heirs or Silicon Valley founders. Instead, it’s a math-driven destination you can plot on a timeline — then march toward with deliberate choices every payday. In plain terms, financial independence means having the freedom and flexibility to make choices that align with your goals - without constantly worrying about money. It’s about feeling secure and confident in your day-to-day life and your future. In the next few minutes, you’ll learn the core habits, sequential steps, and digital tools that turn that definition into reality. By the end, you won’t just understand how to become financially independent; you’ll know which actions to take.
8 min read
Can You Pay Rent with a Credit Card?
Can you pay rent with a credit card? Short answer: yes. Absolutely, but only if your landlord or a third-party processor will take the plastic and you are prepared to shoulder—or cleverly avoid—the fees. Roughly 22% of U.S. renters already put monthly housing costs on debit or credit cards, according to a 2024 payment-trends study by property-tech firm Zego (Salmonsen, 2024). That slice is growing because tenants want smoother cash flow and richer rewards, while landlords crave on-time payments. Still, every swipe passes through a maze of surcharges, interest rates, and utilization limits. Before you tap “Pay,” you need a plan to ensure you have a smart credit card management strategy in place.
10 min read
Is it Wrong to Let Someone Use Your Credit Card?
When someone you trust — a spouse, adult child, sibling, or close friend — asks to use your credit card, the request feels innocent. Maybe it’s for groceries, a plane ticket, or an emergency car repair. But even with the best intentions, lending your credit card can end up with disastrous consequences. So, you might be asking, is it wrong to let someone use my credit card?
The short answer: Yes, it can be wrong — legally, financially, and ethically — depending on the circumstances. Even if you trust the person, the risks often outweigh the convenience. Below, we unpack the hazards, the narrow circumstances when sharing your credit card can work, and safer alternatives that protect you.
8 min read
Improving Your Debt-to-Income Ratio
In Q3 2024, Americans spent 11.3% of their disposable income on household debt payments (St. Louis Fed, 2024). Still, some households suffer massive debts, using over 50% of income to service debt. When your debt payments consume too much of your monthly income, lenders view you as a riskier borrower. This results in unfavorable loan terms, higher interest rates, or loan denials.
Understanding how to improve your debt-to-income ratio helps you qualify for better financing options. In simple terms, your debt-to-income ratio (DTI) computes the percentage of your income that goes toward paying debts each month. In this article, we’ll explain how to compute your DTI ratio, what is a good debt-to-income ratio, the best debt-to-income ratio for various loans and strategies for lowering it.
10 min read
What Is Cash-Out Refinancing?
What is cash-out refinance? It is a mortgage option that lets homeowners replace their existing home loan with a new one and, in the process, convert a portion of their built-up home equity into cash. In other words, if you have substantial equity in your property, you can refinance it for a loan amount that exceeds what you currently owe. The difference between the new loan’s principal and your remaining mortgage balance is then disbursed to you as a lump sum of cash.
A cash-out refinance can be a powerful way to consolidate debt, fund home renovations, or address pressing financial needs. Moreover, mortgage refinance rates are often lower than those of credit cards or unsecured loans. So, how does a cash-out refinance work? Read on for details and the pros and cons.
8 min read
How to Use Personal Loans for Debt Consolidation
You may find yourself overwhelmed by multiple high-interest debts and unsure how to regain control. One way that has helped many people simplify their finances is using personal loans for debt consolidation. This article will provide actionable advice to help you consider whether personal loan debt consolidation might be the solution you need.