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Article: How to create a monthly budget

How to Create a Monthly Budget That Actually Works

A simple step-by-step guide to taking control of your money

Creating a monthly budget does not have to mean giving up everything you enjoy or tracking every penny for the rest of your life.

A good budget has one purpose:

To help you understand where your money goes and decide where you want it to go.

Whether your income is £1,000 or £10,000 a month, the basic process is the same.

You need to know:

• How much money comes in

• How much goes out

• What your essential costs are

• What you are spending unnecessarily

• How much you can save

• What financial goals you are working towards

This guide shows you how to create a practical monthly budget from scratch.

Step 1: Work Out Your Monthly Income

Start with the money you actually receive.

If you have a regular salary, this is relatively straightforward.

Record your take-home income rather than your gross salary.

For example:

IncomeMonthly amountSalary£2,000Other income£150Total£2,150

If your income changes from month to month, consider using a conservative estimate rather than assuming your highest possible income.

Irregular income?

If you are self-employed, work variable hours or receive commissions, look at your previous several months and calculate a realistic average.

It can also be sensible to budget using a lower figure and treat anything above it as additional money rather than money you have already committed to spending.

Step 2: List Your Essential Expenses

Next, write down the expenses you have to pay.

These might include:

• Rent or mortgage

• Council tax

• Electricity

• Gas

• Water

• Broadband

• Mobile phone

• Food

• Transport

• Insurance

• Essential healthcare

• Minimum debt repayments

For example:

Essential expenseMonthly amountRent£750Council tax£130Utilities£150Food£300Transport£120Insurance£50Broadband & mobile£50Total£1,550

If your income is £2,150, you would have £600 remaining before considering other spending and savings.

Step 3: Find Your Regular Commitments

Now look at expenses that may not be essential but are charged regularly.

Examples include:

• Streaming services

• Gym memberships

• Software subscriptions

• Apps

• TV packages

• Memberships

• Cloud storage

• Online services

You may be surprised by how many recurring payments you have forgotten about.

Check your bank statements.

Search for recurring payments and subscriptions.

Ask yourself:

Do I still use this?

Would I buy it again today?

Is there a cheaper alternative?

Cancelling one £10 subscription may not feel significant.

But £10 every month is £120 a year.

Step 4: Track Your Everyday Spending

This is where many budgets fail.

People remember their rent and bills but forget about the smaller purchases.

Coffee.

Takeaways.

Snacks.

Online shopping.

Delivery charges.

Small supermarket purchases.

Entertainment.

These expenses can add up.

For one month, record your spending rather than guessing.

You can divide it into categories such as:

CategoryExampleFoodSupermarket, takeawayTransportFuel, buses, taxisShoppingClothes, household itemsEntertainmentCinema, games, eventsPersonalHaircuts, beautyOtherMiscellaneous

You don't need to judge yourself.

The first objective is simply to see the numbers.

Step 5: Calculate Your Fixed Costs

Now separate expenses that are relatively predictable from spending that changes.

Fixed or regular costs

• Rent

• Mortgage

• Council tax

• Insurance

• Broadband

• Subscriptions

• Debt repayments

Variable costs

• Food

• Fuel

• Shopping

• Entertainment

• Takeaways

• Personal spending

This distinction makes your budget much easier to manage.

Step 6: Decide How Much You Want to Save

Saving should not simply be whatever happens to be left at the end of the month.

If possible, give saving a place in your budget.

For example:

Monthly income: £2,150

Essential costs: £1,550

Other planned spending: £300

Savings: £300

Your budget now has a purpose.

You are not simply hoping that £300 will remain in your account.

You have deliberately allocated it.

Step 7: Give Your Savings a Purpose

Saving becomes easier when you know what the money is for.

Your goals might include:

Emergency fund

Money available for unexpected expenses.

Holiday

A specific amount by a specific date.

Car

Deposit, replacement vehicle or repairs.

Home

Furniture, repairs or a future deposit.

Long-term savings

Money you expect to leave untouched for a longer period.

Instead of:

“I want to save more.”

Try:

“I want to save £2,400 over the next 12 months.”

That means your target is:

£200 per month.

A specific goal is much easier to measure.

Step 8: Don't Forget Annual Expenses

Some expenses don't occur every month.

That doesn't mean they shouldn't be included in your monthly budget.

Examples include:

• Car insurance

• MOT

• Annual memberships

• Christmas

• Birthdays

• Holidays

• Property maintenance

• Annual subscriptions

Suppose your annual car insurance costs £600.

Instead of suddenly finding £600 when renewal arrives, you could allocate:

£600 ÷ 12 = £50 per month

You can then build the money gradually.

This is sometimes called a sinking fund.

Step 9: Look for Expenses You Can Reduce

Now that you can see everything, start looking for opportunities.

Don't try to eliminate every enjoyable expense.

Instead, look for poor-value spending.

For example:

£20 subscription you rarely use

→ Cancel it.

£60 broadband package when a suitable £35 alternative exists

→ Compare providers.

£100 monthly takeaway spending

→ Reduce it to £60.

£40 unused gym membership

→ Cancel or change it.

The objective isn't to make life miserable.

The objective is to spend deliberately.

Step 10: Create Your Monthly Budget

You can now put everything together.

For example:

Monthly budgetAmountIncome£2,150Housing£750Council tax£130Utilities£150Food£300Transport£120Insurance£50Broadband/mobile£50Subscriptions£50Personal & entertainment£200Savings£300Total allocated£2,100Remaining£50

That £50 provides a small buffer.

A budget doesn't have to be perfect.

It needs to be realistic enough that you can actually follow it.

Step 11: Review Your Budget Every Month

Your first budget will probably not be perfect.

That's normal.

At the end of the month, compare:

What I planned to spend

with

What I actually spent.

For example:

CategoryPlannedActualFood£300£340Transport£120£110Entertainment£200£160Savings£300£350

Don't treat differences as failures.

They are information.

If you consistently spend £340 on food, your budget should probably reflect reality rather than pretending you will spend £250 next month.

A useful budget is based on your real life.

The 5 Rules of a Budget That Works

1. Be realistic

Don't create a budget you cannot maintain.

2. Include everything you can

Small expenses can become significant.

3. Budget for irregular expenses

Annual costs should not become financial emergencies.

4. Give savings a specific purpose

A target is easier to follow than a vague intention.

5. Review and adjust

Your budget should change when your circumstances change.

What If You Have Debt?

If you have debt, include your required minimum repayments in your essential monthly commitments.

Then consider whether you have money available for additional repayments.

Two commonly discussed approaches are:

Debt Snowball

Focus on the smallest balance first while maintaining minimum payments on other debts.

The psychological benefit is that you can see individual debts disappear.

Debt Avalanche

Focus on the debt with the highest interest rate first while maintaining minimum payments on the others.

This can reduce the amount of interest paid, depending on the debts involved.

Your personal circumstances matter, so consider getting appropriate financial guidance if you are struggling with debt.

What If You Don't Have Enough Money?

If your budget shows that your expenses are higher than your income, don't simply ignore the result.

Start by checking:

Are all of the figures accurate?

Are there subscriptions you can cancel?

Can any bills be reduced?

Are there cheaper alternatives?

Are there expenses that can be postponed?

If the situation is persistent, you may need more significant changes.

A budget doesn't create money.

What it does is show you the problem clearly.

And once you can see the problem, you can start deciding what to do about it.

Your Monthly Budget Checklist

Before the month begins:

☐ Record your expected income

☐ List essential bills

☐ List subscriptions

☐ Estimate variable spending

☐ Set your savings target

☐ Account for annual expenses

☐ Leave a small buffer if possible

At the end of the month:

☐ Compare planned vs actual spending

☐ Review subscriptions

☐ Check your savings progress

☐ Identify unnecessary spending

☐ Adjust next month's budget

FREE INFINITY QUEEN BUDGET TEMPLATE

You don't need complicated software to start budgeting.

We've created a simple Infinity Queen Monthly Budget Planner to help you organise:

✓ Income

✓ Essential expenses

✓ Everyday spending

✓ Savings

✓ Planned vs actual spending

✓ Monthly totals

Download the free budget template

[DOWNLOAD THE FREE MONTHLY BUDGET PLANNER]

Use it for one month and see what your numbers tell you.

WANT THE COMPLETE FINANCIAL PLANNER?

If you want to go beyond a monthly budget, the Infinity Queen Complete Financial Planner brings your financial planning into one system.

It includes:

✓ Monthly budget planner

✓ Annual financial review

✓ Savings-goal tracker

✓ Emergency-fund planner

✓ Spending tracker

✓ Debt repayment planner

✓ Debt snowball calculator

✓ Debt avalanche calculator

✓ Net-worth tracker

✓ Investment tracker

✓ Bills and subscriptions tracker

✓ Printable worksheets

✓ Editable spreadsheet version

Plan your money. Track your progress. Make better decisions.

Infinity Queen Complete Financial Planner — £19.99

[GET THE COMPLETE FINANCIAL PLANNER]

Final thought

A budget isn't about restricting your life.

It's about making sure your money is being used for the things that matter to you.

You don't need a perfect budget.

You need a budget that reflects your real circumstances, gives you a clear picture of your finances and helps you make better decisions month after month.

Start with one month.

Know your numbers.

Then improve them.

Free downloadable mini budget template: