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Budgeting 101: how to plan your monthly budget

Fredrek Mostapha


Budgeting 101: How to Plan Your Monthly Budget Step by Step

Updated for 2026 • Personal Finance Basics

Creating a monthly budget is one of the smartest things you can do for your money. A budget helps you control spending, save more, and avoid financial stress. In this beginner-friendly guide, you’ll learn how to plan a monthly budget in a simple and practical way.

What Is a Monthly Budget?

A monthly budget is a plan that shows how much money you earn and how you spend it each month. It helps you decide where your money should go instead of wondering where it went.

In short:
Income − Expenses = Savings

Why Is Budgeting Important?

  • Helps you avoid overspending
  • Makes saving easier
  • Reduces financial stress
  • Helps you reach financial goals faster

Step 1: Calculate Your Monthly Income

Start by listing all sources of income you receive in a month. This may include salary, freelance work, side income, or any other regular payments.

Step 2: List Your Monthly Expenses

Divide your expenses into two categories:

  • Fixed expenses: rent, utilities, internet, insurance
  • Variable expenses: food, transportation, entertainment

Step 3: Use the 50/30/20 Rule

A simple budgeting method for beginners is the 50/30/20 rule.

Category Percentage Example
Needs 50% Rent, food, bills
Wants 30% Shopping, entertainment
Savings 20% Emergency fund, investing

Step 4: Track Your Spending

Tracking your spending helps you stay within your budget. You can use a notebook, spreadsheet, or budgeting apps to monitor your expenses.

Tip: Review your spending weekly to avoid surprises at the end of the month.

Step 5: Adjust and Improve

Your first budget will not be perfect, and that’s okay. Adjust categories as needed and focus on consistency, not perfection.

Common Budgeting Mistakes

  • Forgetting small daily expenses
  • Setting unrealistic limits
  • Not reviewing the budget regularly
  • Ignoring savings

Conclusion

Budgeting is not about restricting yourself, but about giving your money a clear purpose. By planning your monthly budget, you gain control, confidence, and peace of mind.

Disclaimer: This article is for educational purposes only and does not constitute financial advice.