How to create a monthly budget in 7 steps

The 7 steps

1. 1

   Gather your real numbers

   Pull up your last month of bank and card statements. You need two figures: what came in, and what went out. Estimates are fine for planning, but real statements keep you honest.

2. 2

   Write down your take-home income

   Use the money that actually lands in your account after tax. If your income varies, take the average of your last three months — or use your lowest recent month to be safe.

3. 3

   List your fixed expenses

   These are the bills that arrive every month at roughly the same amount: housing, utilities, insurance, transport, subscriptions, and minimum debt payments. They are the hardest to cut but the easiest to plan around.

4. 4

   Estimate your variable expenses

   Groceries, dining out, entertainment, clothing — the categories where your choices matter most. Use last month's actual totals as your starting estimates, then adjust consciously.

5. 5

   Decide your savings line first

   Before the leftover goes to wants, decide what goes to savings and extra debt payments. Treat it like a bill you owe your future self. Even 5–10% counts.

6. 6

   Check that the plan balances

   Income minus all expenses and savings should be zero or positive. If it is negative, trim variable categories first, then revisit subscriptions and fixed costs. The worksheet below does the maths for you.

7. 7

   Track and adjust through the month

   A budget is a living plan. Check in weekly, move money between categories when life happens, and do a full review at month's end. The second month is always easier than the first.