Beginner's Guide to Creating a Monthly Budget

Introduction

Are you tired of running out of money before the month ends? Do you feel like your income disappears without knowing where it goes? If yes, you’re not alone — and you’re not helpless either.

Creating a monthly budget is the first step toward taking control of your finances. Whether you earn a little or a lot, a budget helps you manage spending, avoid debt, and reach your financial goals faster.

In this step-by-step guide, you’ll learn how to make a monthly budget that actually works — even if you're a beginner.

📊 What Is a Monthly Budget?

A monthly budget is a plan that helps you track your income, spending, and savings over a 30-day period. It gives you a clear picture of where your money is going so you can make better financial decisions.

🛠️ Step-by-Step: How to Create a Monthly Budget

Step 1: Know Your Monthly Income

Start by calculating how much money you make each month after taxes (your "net income"). Include:

• Salary or wages

• Freelance or side job earnings

• Business income

• Any fixed passive income (like rent or dividends)

🧮 Example:
If your salary is PKR 70,000/month and your side gig earns you PKR 10,000 — your total income is PKR 80,000.

Step 2: List All Your Monthly Expenses

Make a list of all your monthly fixed and variable expenses.

🧾 Fixed Expenses (same every month):

• Rent or mortgage

• Utility bills

• Loan payments

• Insurance

🔄 Variable Expenses (change every month):

• Groceries

• Transportation/fuel

• Entertainment

• Eating out

• Shopping

Don’t forget small costs like mobile credit, tips, and subscription services (Netflix, Spotify, etc.).

Step 3: Categorize & Prioritize

Divide your expenses into essential and non-essential categories:

💡 Essentials:

• Food

• Housing

• Transport

• Utilities

• Minimum debt payments

🎉 Non-Essentials:

• Dining out

• Online shopping

• Entertainment

• Subscriptions

👉 Pro Tip: Always prioritize essentials before spending on wants.

Step 4: Set Spending Limits

Now assign a budget limit to each category based on your income.

📌 Example Breakdown (Income: PKR 80,000):

Category Budget Limit (PKR) Rent 20,000 Groceries 15,000 Transport 6,000 Bills & Utilities 5,000 Entertainment 4,000 Shopping 5,000 Emergency Savings 10,000 Debt Repayment 10,000 Total 75,000

Use a buffer of 5–10% for unexpected expenses.

Step 5: Track Your Spending

Tracking is the heart of budgeting. Use:

• A notebook

• Google Sheets

• Mobile apps like Wallet, Goodbudget, or Spendee

Update your spending every few days to stay on track and avoid overspending.

Step 6: Adjust & Improve Monthly

At the end of each month:

• Review your spending

• Compare it to your budget

• Adjust where needed

If you spent too much on food but didn’t use your entertainment budget — shift it accordingly next month.

💡 Tip: Keep improving your habits, not just the numbers.

📈 Benefits of Having a Monthly Budget

• Helps you save more each month

• Prevents overspending and debt

• Helps you achieve goals (buy a car, pay off loans, go on vacation)

• Brings peace of mind knowing where your money is going

• Improves your credit and financial reputation

🚫 Common Budgeting Mistakes to Avoid

• Ignoring small purchases (they add up)

• Not tracking your spending

• Setting unrealistic limits

• Forgetting irregular expenses (birthdays, car repairs)

• Not budgeting for savings

🧠 Final Thoughts

Creating a monthly budget doesn’t mean you can’t enjoy your life — it simply means you’re in charge of your money, not the other way around.

Start small, be consistent, and tweak your budget over time. Soon, you’ll see the difference — in your savings account and your stress level.