How to Budget Your Monthly Income

by Joy Uyeno, Demand Media
    Small changes, like cooking at home, make for big savings.

    Small changes, like cooking at home, make for big savings.

    Living without a budget is like driving to a destination in an unfamiliar place -- it's easy to get sidetracked, lost and thrown off course all together. Creating a budget will help you stay on course each month, and the destination is your financial freedom. Know where you're starting from and look for the best shortcuts but don't be too harsh on yourself if you go a little off course.

    Step 1

    Calculate how much money you make per month after taxes. This amount is called your take home pay. Add in any additional recurring income you make from freelance work or a part-time job. By writing down where you're starting from, you'll have a good idea of what you have to work with when creating your budget.

    Step 2

    Track your expenses for a week. Write down everything you spend money on -- gas, movie tickets, candy, clothing -- everything! The easiest way to do this is to collect your receipts each day, then log your purchases on a spreadsheet each night. At the end of the week, break your purchases down into categories: groceries, entertainment, transportation, hobbies and any other categories specific to your lifestyle. By really understanding where your money is going, you will be able to make changes to fit your priorities. Multiply your weekly expenses by 4.5 to come up with a projection for your monthly spending.

    Step 3

    List all recurring bills, including credit card, phone and loan payments, as well as utilities and rent/mortgage. Contribute at least 10 percent of your total income to savings, and make sure that your credit card payments are higher than the minimum balance. Add the recurring bills, savings and increased credit card payments to your projected monthly spending total to come up with your grand spending total.

    Step 4

    Compare your grand-spending total with your income total. Figure out how you can earn more and/or spend less. Spending less usually comes down to making fewer thoughtless purchases and focusing on enjoying the same things in a more frugal fashion. Do you find yourself reaching for magazines and candy in the checkout aisle at the grocery store? Make a conscious effort to stop. Do you eat lunch out every time you go to work? Consider bringing leftovers a few days a week. Small changes can have a big impact on your greater financial picture.

    Step 5

    Adjust as necessary. Your budget will change as your life changes, so continue to monitor your spending and saving each month and see how the budget fits your day-to-day existence. If you're having a lot of trouble sticking to a particular part of your budget, see if you can cut back in another area. Budgets are guidelines, so it's not necessary to be overly rigid about staying strictly inside the lines. The most important thing is to live within your means and be conscious of your spending so that you aren't surprised by a dwindling checking account balance.

    About the Author

    Joy Uyeno has been writing about travel, food, fashion, culture and finance since 2005. For three years she wrote a column for the "Honolulu Star-Bulletin" aimed at young and first-time travelers. Her writing has appeared in several local and national publications, including the 2008 anthology "Honolulu Stories." She holds a Master of Arts in writing and publishing from Emerson College.

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