When your paycheck hits, there’s that little burst of happiness that comes from having a well-padded bank account.

But then the end of the month rolls around — and you may go from flush to flustered.

That’s where a creating a monthly budget comes in. It enables you to keep track of the money that’s going in and out of your bank account. Plus, a budget will help ensure you’re able to cover your day-to-day expenses while still saving for future goals like retirement or your kids’ college.

If you’ve never created a budget before — or simply need a fresh start on one you’ve already got — we’re here to help.

  1. TOTAL YOUR MONTHLY TAKE-HOME PAY

    First things first: How much money do you have to work with? Add up what you earn each month after taxes and payroll deductions, because you want to work from money that’s actually being deposited into your bank account. Include not only income from a regular paycheck, but also the take-home pay you earn from a side gig or part-time job. If your side jobs don’t deduct taxes from your paychecks, then only include what you keep after you’ve set aside an amount to pay taxes.

  2. ADD UP WHAT YOU SPEND ON FIXED COSTS

    These are your bills and expenses that don’t tend to vary much from month to month. They can include essential costs like your mortgage or rent, car payment, utilities, cell phone bill, day care or monthly insurance premiums that don’t already come out of your paycheck. They also include the minimum monthly amounts you’re required to pay on any of your debts.

    Also include in fixed costs those nice-to-have expenses like your gym membership or Netflix subscription — basically any recurring bill you have that is predictable from month to month.

  3. ADD UP CONTRIBUTIONS TO FINANCIAL GOALS

    This category includes what you’re currently putting toward savings goals, as well as how much you put toward paying down debt each month that goes above and beyond your minimum payments.

    For example, any extra payment you put toward your monthly student loan bill; emergency fund contributions; or any money you’re putting toward a dream vacation, home down payment, or college savings would count here. Also in this category? Money you’ve been putting toward paying down that stubborn credit card debt that exceeds your minimum payment.

    One note about retirement savings: Since you’re using your take-home pay as the baseline for your budget, don’t include any 401(k) contributions that come out of your paycheck here. Do include any retirement contributions you make after you get your paycheck — for example, what you transfer to an IRA that comes from your checking account.

  4. ADD UP WHAT YOU SPEND ON NON-MONTHLY COSTS

    One part of a budget that individuals typically don’t account for are irregular, non-monthly payments. Because these types of costs can fall off your radar until right before they’re due, it’s important to account for them in your budget.

    So how do you do that? Add up what you spend every year on things like quarterly taxes, auto registration fees, annual insurance premiums, school tuition and travel. What you spend on gifts for holidays, weddings, birthdays, etc., can also fit in this category.

    Then take that total and divide by 12: This is how much you should put away each month in a separate savings account so that when those bills roll around, you know you’ve got the cash to pay for them.

  5. ADD UP YOUR FLEX SPENDING

    By flex spending, we mean what you spend each month on costs that tend to fluctuate. Food falls into this category because what you spend on groceries, work lunches and eating out probably isn’t very consistent. Also included are what you spend on shopping, gas, drugstore runs and entertainment — any monthly expense that isn’t set in stone.

    If you’re not sure what this figure should be, look at how much you’ve spent over the past three months and use that to get a clearer picture. Or pick a month that you’d consider a typical month as far as your flex spending goes, and use that figure.

  6. DO SOME SIMPLE MATH

    Take your total monthly take-home pay and subtract your fixed costs, financial goals and that monthly amount you should be saving to cover your non-monthly expenses.

    What’s left is how much you have available for flex spending. Is this number higher than what you added up as your actual flex spending? Then congratulations — you’re living within your means!

    But if your actual flex spending is higher than what the math says it should be, it means you’ve got some work to do. You’ll have to figure out which of your expenses are eating up too much of your budget, and where you may want to cut back to make sure you aren’t going into debt to afford your lifestyle. 

Even if you aren’t overspending, though, it’s still worth taking a look at your expense categories to figure out if you’re happy with where your money is going compared with the goals you have for you or your family. For instance, maybe you’ve been wanting to up your IRA contributions for a while. Would you be willing to cut cable in order to divert that money to retirement? Do you find your fixed costs take up such a large chunk of your budget pie that you don’t have any “fun money” left?

Crafting the right budget for you means finding a balance between being able to afford your lifestyle now while saving for your future later — without feeling like you’re depriving yourself. So don’t be afraid to adjust your figures as your goals shift. After all, your life will change over time, and so should your budget.

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