Take Control of Your Finances and Learn How to Make a Monthly Budget


Bronze Wordsmith
May 17, 2018
Starting a budget is one of the essential life skills everyone has to learn, whether they are a kid or a grown-up… and to be honest, I’ve met a lot of grown-ups who are still learning how to budget. But hey, no shame there. I actually think it’s cool that they acknowledged that budgeting is a skill they need to learn. And I’m a firm believer that the best time to learn to budget is yesterday. But the second-best time is today.

If you were wondering how to set up a budget, I got you. This post will cover some budgeting and finance basics. This is just the tip of the iceberg. Hopefully, they set you on a course for financial freedom and responsibility. Once you’ve gotten the hand of these concepts, you can start looking into more advanced financial concepts like investing. But for now, we’ll start at the beginning: how to start a budget. Wanna learn budgeting 101? Read on!

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Budget 101

As I mentioned above, these are basic budgeting concepts — your budget 101, of you will. But these are good skills to learn if you’re a budgeting newbie — and even budgeting experts might learn a new thing or two from this blog post.

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Don’t Rely on Discipline

This might be a controversial piece of advice, but I stand by it. When you try to manage your finances through force of will alone, you’re setting yourself up for failure. Because I believe that people will always act according to their whims. If you get the urge to splurge on a fancy pair of sneakers, you can control that urge. But that’s kind of like holding your breath – you’ll have to give in eventually.

I’m not saying you should give in to your whims – far from it. But you should use saving and budgeting methods that don’t rely on discipline to work. One example is leaving your credit card at home. That way, even if you get tempted to buy something at the mall, you won’t actually be able to do so. I’ll be tackling another similar method in the next item.

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Get an Automatic Savings Account

This is one way to bypass the discipline trap. When you get an automatic savings account, the bank automatically docks a certain amount when your monthly payment comes in, and puts that into a savings account. This is a great way to budget and save because it removes discipline from the equation. Simply put, there is nothing I can do. My savings money is going into my savings account whether I like it or not.

So the next time you go to the bank, ask the bank manager about their automatic savings accounts. You’ll be glad you took that plunge – and your budget will thank you for it.

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Make a Budget Based on Your Income After Taxes

I’ve noticed a common problem people make when they first learn how to budget: they base their budget on their gross pay. Meaning, the amount they make before they pay taxes. And I happen to think that is a pretty big mistake when creating a monthly budget. And that’s because it gives the illusion that a person has more money than they actually have.

When you budget your net pay, you have a better idea of how much money you actually have. It might not feel as great, since your take-home pay is, of course, smaller. But the goal is to adopt an effective budget, not feel good.

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Adopt a “Modular” Budget

Learning to budget isn’t such a hard skill to grasp – all you have to do is start. Once you start, you will pick up the finer skills needed to budget. One of the tips I always give people who are beginning to start on this journey is to adopt a “modular” budget. And by that, I mean splitting their budget into three main blocks:

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50% Pays for Needs

Ideally, half of your monthly income should pay for all the necessities, such as groceries, insurance payments, utilities, and car payments. Not that the line between needs and debt payments can sometimes be blurred. For example, car payments are definitely a necessity, but they are also technically debt. And that’s why this budget is modular, you can easily move one item around, based on your own budgeting plans and preferences.

30% Pays for Wants

This is the fun stuff, like hobbies, non-essential home improvement projects, and vacations. It is also up to you to determine what is actually a want. For example, I placed my high-speed internet connection under this section. While an internet connection is definitely a requirement for modern life, I don’t really need the speed I’m paying for. I got this subscription because I love playing video games online. And that is why I placed my monthly internet payments under wants.

20% Goes to Savings and Debt Payments

After you’ve paid for all the stuff that needs paying, the money left over should go to savings and paying for debts. As I mentioned above, what counts as debt depends on your own definition. Recurring payments like insurance, mortgage, and car payments are technically debt. But you can always classify them as necessities. I try not to overthink it; if I’m making monthly payments for something, I count that as debt, so it goes into this budget.

One more thing before we end this article: you don’t have to stick to the 50-30-20 rule. In fact, you should determine the percentages based on your own lifestyle, goals, and priorities. This is just a guide to get you started. And that’s why it’s modular – you can easily move stuff around. For example, if you’re trying to get out of debt, it might not be such a good idea to allocate 20% of your income to non-important things.

The key here is to be honest about your finances and goals, and make the necessary adjustments based on them.
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