Level 3 of 5 Money Management Levels - Create Monthly Budget

However positive minded we are, our income  is still limited and there is no cheat codes like in one of the games I spent countless hours playing in college (yeah, "show me the money"!) that can suddenly transfer unlimited amount of money to our bank account.

A monthly budget lets us plan on how we allocate our income to pay for our monthly expenses.

If you never created a budget before, initially you might be shocked to find out that you don't have enough money to spend on what you want.

Don't get discouraged, the sooner you know you're short on money, the better. Because then you can take actions sooner too.

How to create a budget?

Disclaimer: Information shown is for illustrative purposes only and is not intended as investment, legal or tax planning advice. Please consult a financial adviser, attorney or tax specialist for advice specific to your financial situation.

1. Write how much is your average income a month.

Example:

2. Write your personal expense categories

*Start with the basic needs and proceed until all your expenses categories are added. Don't miss anything as this will defeat the budget purpose.

Example:

Note: Don't forget to include savings.

3. Then add how much you spend for each categories

*This will be very easy if you have done the expense tracking in level 2.

Example:

4. The total expenses should match the income set on the first step. 

It's also helpful to add the percentage level to see how the budget is distributed.

Example:

5. (Optional) Add pie chart to visualize the percentage distribution.

The spreadsheet containing examples above can be viewed here.

See you on the next money management level!