How To Prepare Monthly Budget Effectively?

Oh, my god! Is it necessary to plan a budget?

This is the first reaction from majority of the people. Shiver courses down through the spine at the very utterance of ‘budget’. In reality, budget is a structured format of your weekly/monthly/annual expenses. You can keep track of where your money goes and distribute your earning in the best possible way. With the a few monthly budget tips you can take control of your finances.

Psychology of Budgeting

Let’s go straight to how you can prepare a budget more effectively.


Create a spreadsheet in your computer. If you like to go the traditional way, buy a paper file. Create columns and rows to list categories and corresponding expenses. The headings in the columns will reflect the categories of your monthly spending whereas the rows will contain the names of months.

The first few columns must be devoted to daily expenses like grocery bills and day-to-day travelling expenditure etc. The next few categories should be reserved for regular monthly expenses like electric bills, mortgage payment, car insurance, health insurance premium, tuition fees of your children and other must-pay categories.


A separate column should be created under the heading of ‘Miscellaneous’ or ‘Extras’. It is better if the column has sub-categories with suitable heading. Most of the miscellaneous expenditure includes unplanned and incidental spending. However, some expected yet irregular spending can also be placed under the heading. If you are to attend an upcoming wedding party or birthday celebration or marriage anniversary, then you are likely to buy gifts for the event. The expenses will be included into this added column. Unexpected expenses for medical treatment or other purposes should also be contained in this category.


Maintenance cost must also figure in your monthly budget. It is not that you have to pay for your maintenance bills month in and month out, still it is important to have a separate sub column under the ‘Miscellaneous’ or ‘Extras’ category. Car repairing, change of water pipe, electrical appliances replacements etc. go into this sub-category.

Step- 4

Do you donate to charitable organization? The amount donated for charity purpose must not be missed out in your budget. The idea behind preparing a budget is to keep a track of your every expense.  Donating to a charity is a great thing, but when it comes to managing your finances make sure it donating doesn’t affect your personal finances. If you are trying you get out of debt then every penny you have matters.


Are you a travel buff? Exploring the unexplored – is it sort of addiction for you? If yes, then you need to add another column which will have ‘travel’ in its heading. Input in the estimated cost you need to bear for annual excursion. Depending on where you are heading to, travelling cost may be a paltry figure or a tidy sum. Whatever the amount is, you must note it down on paper or input it in the virtual file.


You need to make another column for the money you owe due to debt. It is one of the best monthly budget tips that can help you keep tabs on how much you owe money. Whether it’s the money you owe to the bank or from anyone you have borrowed from, make sure you list the amount of money you still owe. It will also help you keep a tab on how much money you need to put aside every month to pay off the debt. Credit card debts are one of the most common types of debts. You aim should be reduce the debt and improve your credit score.

Benefits of preparing a budget

The best benefit of preparing a budget is you can have a track of possible expenses in more structured format. Does your take-home income exceed the budget? Voila! That sounds really great. Don’t make a waste of the left-over; instead use it to pay off old debts or for an investment deal. But if the case is polar opposite, then you need to work on your budget once again. Curb out the impulsive expenditures so that you can effectively balance your budget.

Whether you have less money or enough or even extra, creating a budget is always helpful. It can help you save more and grow your wealth. When you create a budget and stick to it you can save money for those uncertain times.

The Bottom Line

These monthly budget tips can help you create an effective strategy to save more money and improve your financial health. To create an effective monthly budget all you need is a spreadsheet or piece of paper and you will be ready to take control of your finances.  Go ahead and create your monthly budget today.