How to Create a Monthly Budget from Scratch

Fifteen years ago, I had no idea what I was doing with my money. Budgeting seemed like one of those grown-up tasks reserved for people who “had it together.” I was relying on apps like Mint and Personal Capital (aka Empower) to do the work for me, and while they were helpful, I wanted to prove to myself that I could do it on my own.

So, I got to work. I watched countless YouTube videos and called my big brother, who had bought a house in New York all by himself. He shared his tips, and over time, I figured out that budgeting isn’t some mystical skill. It just takes discipline, tunnel vision, and a clear goal. And guess what? If I could do it, so can you!

Here’s a step-by-step guide to creating a monthly budget from scratch. Let’s simplify this and get you started!

Step 1: Know Your Income

The first step is knowing how much money you have coming in. Look at your paycheck, side hustles, or any other sources of income. Focus on your net income (that’s the amount you take home after taxes).

For example, let’s say your monthly income is $1,786.40. That’s our starting point.

Step 2: Track Your Expenses

Next, figure out where your money is going. Split your expenses into two categories:

• Fixed expenses: Things that don’t change month to month, like rent, utilities, or a car payment.
• Variable expenses: Stuff that changes, like groceries, gas, or entertainment.

You can use a notebook, spreadsheet, or even your phone’s Notes app. The key is to get an honest look at your spending.

Step 3: Set Your Goals

What do you want your money to do for you? Are you trying to pay off debt, save for a vacation, or build an emergency fund? Having a clear goal will keep you motivated.

For example:

• Short-term goal: Save $500 for holiday gifts.
• Long-term goal: Save for a down payment on a house.

Step 4: Pick a Budgeting Method

Here are three simple budgeting methods to choose from:

1. The 50/30/20 Rule

• 50% needs: Essentials like rent, groceries, and utilities.
• 30% wants: Fun stuff like Netflix or dining out.
• 20% savings/debt: Money for saving or paying off debt.

2. Zero-Based Budgeting

Every dollar has a job. If you earn $1,786.40, you plan out where all $1,786.40 will go. At the end of the month, there should be $0 left unaccounted for.

3. Envelope System

For cash lovers! Put physical cash into envelopes labeled with categories (e.g., groceries, entertainment). When the envelope is empty, you’re done spending in that category for the month. And of course, you can check out my cash envelope labels here!

Step 5: Create Your Budget

Here’s an example budget based on $1,786.40:

Category	Amount
Rent	$800.00
Utilities	$150.00
Groceries	$300.00
Transportation (Gas)	$150.00
Entertainment	$100.00
Savings/Debt	$286.40
	Total: $1,786.40

Notice how every dollar has a place. That’s the key to staying on track.

Step 6: Monitor and Adjust

Your first budget won’t be perfect, and that’s okay! Check in weekly to see how you’re doing and make adjustments as needed. If you overspend in one category, see if you can pull from another.

Staying Motivated

Budgeting isn’t hard but you’ve gotta make it into a habit. And like any habit, it gets easier with time. Here are a few tips to keep you going:

• Automate what you can: Set up auto-pay for bills and savings.
• Celebrate wins: Saved $100 this month? Treat yourself (within reason!).
• Focus on your goals: Print out a picture of what you’re saving for and put it where you’ll see it daily.

Final Thoughts

Budgeting doesn’t have to be overwhelming or boring. It’s a tool that helps you take control of your finances and build the life you want. Discipline, tunnel vision, and a goal are all you need to make it work. Check out my printable budget planner that will help you get right on track with your finances!

Start today. Even if it’s messy, even if you’re unsure…just start. You’ve got this!