How to Create an Effective Monthly Budget

If your goal is to get control of your money, it's essential that you create a monthly budget. Not only does a budget help you track your spending, it can help you achieve your financial goals.

Here's the reality of budgeting in the United States. According to a 2017 report by Market Watch, only 30 percent of American households operate according to a budget.

That means that the majority of people in American households operate without a monthly budget. It's no wonder that half of Americans don't have $400 in the bank to pay for emergency expenses.Operating with a budget can prevent you from living paycheck-to-paycheck and incurring late fees on your bills. If you don't budget your money, you shouldn't worry. You can create a budget today. Here are a few simple ways that you can create an effective monthly budget.

1. Review your expenditures from the past 90 days

Before you create a budget, you must first determine how you've been spending your money. For that reason, you should review your bank and credit card statements from the past 90 days.

Pay close attention to your discretionary spending. How often do you purchase items from the convenience store? If so, how much do you spend? What are you most likely to purchase?

What's the total amount of money that you spend on food each month? How much of your money is spent at restaurants and coffee shops?

Take a look at all of your expenditures including maintenance costs, gas expenses, car payments, rent/mortgage payments, transportation costs and utilities. Calculate the amount of money that you've spent on each category for every month for the past 90 days.

2. Review your income

Your income is an essential component of your budget. If you aren't aware of how much money you earn, it's difficult to create an accurate budget.

The first thing you should do is calculate your monthly income. This is the amount on which you will base your budget projections.

If your income fluctuates each month, you can base your budget on the lowest amount that you've earned on your paycheck in the past 90 days. If your income is consistent, you shouldn't have a problem calculating your income for each month.

3. Write down your goals

By creating a monthly budget, what do you hope to achieve? Maybe your goal is to multiply your savings account or pay off debt.

You should make a list of your financial goals as it relates to creating a monthly budget. Take a few moments to review the list.

Select the most important goal on your list. Develop an action plan that provides the steps that you need to take to achieve that goal.

Here's a word of caution. Don't try to achieve all of your goals at once. If you aren't used to setting goals as it relates to budgeting, you may become so overwhelmed that you quit.

After you gain traction with one goal, set another goal. It's okay to set multiple goals at once as long as you are taking action on your other goals.

4. Take immediate action

While it's important to create a written budget and goals, you must take consistent action at once. Resist the urge to put this off until some distant time in the future.

If you're between paydays, it's fine to wait until you receive your next paycheck. However, don't let procrastination get the best of you. Implement your budget as soon as you can.

5. Change your spending habits

Spending money without a budget is exciting. You can walk into a store and purchase anything that you want.

Unfortunately, it's difficult to remain financially stable if you continue to spend your money in this manner. If you want to reap the benefits of your budget, you'll have to change your spending habits.

The good news is it doesn't have to be difficult. Start by making small changes to your spending habits.

Pack a tasty lunch and take it to work each day. Purchase snacks from a food warehouse instead of paying for snacks at a vending machine.

Here's something to think about. The average American worker spends $11.14 per day on lunch twice a week. Over thirty years, the total amount spent on lunch is $88,840.

Creating a monthly budget can improve your finances. By following these tips, you can easily create a budget that helps you achieve your financial goals.