To create a monthly budget, track spending, list all expenses, and allocate income to specific categories, recommends Consumer.gov, a website administered by the Federal Trade Commission. Knowing how you currently spend your money and what expenses you have on a monthly basis helps determine where your money needs to go.
To get started with budgeting, gather documents to make the budgeting process easier, such as your pay stubs, bills and bank statements, recommends Consumer.gov. The bank statement reveals where you spend extra money beyond your monthly bills. Write down each expense, starting with the regular bills that you must pay each month. For bills that change each month, such as utilities, calculate an average based on the last several months.
The variable expenses, such as groceries, clothing and entertainment, are often more difficult to calculate. Estimate what you spend in each category to get an initial budget. Recording every cent you spend for the next month shows you how much you're actually spending in those categories, notes Bankrate. This helps determine if you're spending too much in certain areas. It also enables you to adjust the amounts you allocate to each area.
Write out a list of all of the expenses and the amount you spend for each, suggests Consumer.gov. Total all income sources. The income should be higher than the total expenses. If you have more expenses than income, find areas to cut back.