We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free - so that you can make financial decisions with confidence.
Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover.
The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories, except where prohibited by law for our mortgage, home equity and other home lending products. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you.
Checkmark Expert verified
Bankrate logoHow is this page expert verified?
At Bankrate, we take the accuracy of our content seriously.
“Expert verified” means that our Financial Review Board thoroughly evaluated the article for accuracy and clarity. The Review Board comprises a panel of financial experts whose objective is to ensure that our content is always objective and balanced.
Their reviews hold us accountable for publishing high-quality and trustworthy content.
Written by
Karen Bennett
Karen Bennett is a senior consumer banking reporter at Bankrate. She uses her finance writing background to help readers learn more about savings and checking accounts, CDs, and other financial matters.
Edited by
Marc Wojno
Marc Wojno is a seasoned and accomplished finance editor and writer with more than two decades of experience editing and writing across a variety of news platforms including newswires, newsletters, magazines and online news sites.
Reviewed by
Robert R. Johnson
Robert R. Johnson, Ph.D., CFA, CAIA, is a professor of finance at Creighton University and chairman and CEO of Economic Index Associates, LLC.
Bankrate logoAt Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity , this post may contain references to products from our partners. Here's an explanation for how we make money .
Bankrate logoFounded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next.
Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. All of our content is authored by highly qualified professionals and edited by subject matter experts, who ensure everything we publish is objective, accurate and trustworthy.
Our banking reporters and editors focus on the points consumers care about most — the best banks, latest rates, different types of accounts, money-saving tips and more — so you can feel confident as you’re managing your money.
Bankrate logoBankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. Here is a list of our banking partners.
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers.
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information.
Bankrate logoYou have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey.
Bankrate follows a strict editorial policy, so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers.
We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money.
Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories, except where prohibited by law for our mortgage, home equity and other home lending products. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range, can also impact how and where products appear on this site. While we strive to provide a wide range of offers, Bankrate does not include information about every financial or credit product or service.
While few people would say they actually enjoy budgeting, that doesn’t make the task any less important. Making a budget helps you plan for expenses, and it can provide insight into your spending habits, allowing you to curb spending more easily.
The current high-inflation environment may have many people feeling especially strained when it comes to affording monthly expenses — and trying to save at the same time. While it won’t beat inflation altogether, establishing a budget will help you get by and lower the stress of covering upcoming expenses.
If you’re looking to build your first monthly budget, or want to revise one you already have, here are some tips.
A monthly budget is a plan for how you’ll spend your money each month. Monthly budgets are popular because many recurring expenses occur on a monthly basis, such as rent, utilities, credit card payments and other loan payments.
Ideally, your budget will involve spending less than you make each month, allowing you to save money. Also, when your expenses don’t exceed your earnings, you won’t need to tap into savings or borrow money to make ends meet.
A budget helps you plan for expenses before they happen, rather than hoping you have enough money to cover essential costs or emergencies. Budgets can also make you more mindful of your spending, as you prioritize your spending on things that are important to you over what’s less important.
Regular budgeting carries many tangible benefits, which often include:
What’s more, checking in regularly with your finances helps ensure you’ll catch any bank errors or fraudulent transactions.
The first step is to determine how much money you earn each month. This will determine how much you can spend (and save) each month.
When calculating your monthly earnings, look at consistent sources of income. You should include your paycheck from your day job, but should probably exclude less consistent sources of money, such as selling old items you no longer need.
Make sure you calculate your earnings using your net income, also known as your take-home pay. This is the money you have left over after taxes and payroll deductions.
One of the best ways to get a sense of how much you should budget for is to track your actual spending over the course of a few months. Various budgeting apps can help you track spending by linking to your bank account, or you could track spending manually by saving receipts and adding up expenses yourself.
As you track your spending, you may find that you spend more or less than you expected in different categories. This is important because it is a good lead-in to the next step in the process.
Don’t forget to budget for expenses that may occur annually instead of monthly. You should account for expenditures such as property taxes, car insurance payments, doctor or veterinary visits and vacation costs.
Once you’ve spent time tracking your spending, it’s time to review your spending history and how it aligns with your financial priorities.
Everyone has expenses they can’t avoid, such as housing, food and transportation. However, if you aren’t keeping an eye on your spending, it’s easy to overspend on nonessential things. For example, you may find that you’re spending hundreds of dollars each month on takeout meals or have an array of monthly subscriptions you rarely use, from streaming services to gym and club memberships.
Building a budget isn’t about limiting yourself to only spending money on essentials. Instead, it’s about allocating your money in the way that makes sense for you. Once you see how much you’re spending on certain things, you might want to try adjusting your spending habits to increase your savings or put more money toward fulfilling hobbies or activities.
To design a budget, list the line items that correspond to each spending category. It’s smart to pay yourself first, so be sure to include a line item for savings, whether it be for an emergency fund, a new car, a down payment on a home or other purposes. When it comes to savings advice, take the words of the Oracle of Omaha, investing guru Warren Buffett who said, “Do not save what is left after spending, but spend what is left after saving.”
Common expense categories in a budget include:
Next, look at your spending habits and see how they line up with your priorities. If your actual spending is already aligned with your goals, you can use your spending history as a guide for your budget. If you want to completely overhaul your spending habits, you’ll want to build your budget from the ground up instead.
50/30/20 rule: One popular rule of thumb for building a budget is the 50/30/20 budget rule, which states that you should allocate 50 percent of your income toward needs, 30 percent toward wants and 20 percent for savings. How you allocate spending within these categories is up to you.
There aren’t any strict rules when it comes to budgeting, though, as long as you spend in a way that’s satisfying and helps you reach your financial goals. The one truly important guideline is to spend less than you earn each month. Even if you can’t save 20 percent of your income, get into the habit of saving as much as possible.
A budget is a living document that can be changed over time, as needed. Once you’ve built your budget, you should continue to track your spending and follow your spending plan.
As time passes, your priorities and life circumstances may change. For example, you take on a new loan or you receive a pay raise. Review your budget periodically to see if it needs revising based on any such changes.
Using the steps outlined above, let’s consider how someone might make a budget for a net income of $4,000 a month. Remember that net income is the money you have for a budget after subtracting taxes and deductions. The net income can include earnings from a full-time job as well as any passive income or side gigs.
It might be helpful to organize each line item by priority. The first priority in this budget is savings, which is followed by needs or essentials, and then by wants or nonessentials.
After making the budget, you’ll want to track your spending to see how actual expenses line up with predicted expenses. Then, adjust the budget accordingly to make up for any differences.
| Category | Line item | Amount per month |
|---|---|---|
| Savings | Emergency fund | $300 |
| Vacation fund | $200 | |
| Retirement | $200 | |
| Total | $700 | |
| Needs | Rent | $1,200 |
| Transportation | $400 | |
| Electricity | $60 | |
| Gas/oil | $30 | |
| Phone | $60 | |
| Internet | $40 | |
| Groceries | $270 | |
| Personal care/hygiene | $40 | |
| Credit card | $100 | |
| Total | $2,200 | |
| Wants | Streaming subscriptions | $70 |
| Dining out/ food delivery | $250 | |
| Apparel | $100 | |
| Nightlife | $100 | |
| Movies/theater | $50 | |
| Gifts | $100 | |
| Miscellaneous spending | $430 | |
| Total | $1,100 | |
| Total for all categories | $4,000 | |
As prices continue to rise, the importance of tracking where your money goes rings truer than ever. Making a budget is an effective way to keep up with your spending, gain a better understanding of your financial habits and incentivize saving.
Before creating a monthly budget, track your spending for a month, noting necessary expenses, unnecessary expenses and where there’s room for savings. You’ll calculate your expenses against your available income, with the goal of spending less than you earn. To help save on time and menial work, consider using a budgeting app or calculator to establish your budget.
Bankrate’s René Bennett and writer TJ Porter contributed to earlier versions of this story.
Arrow Right Senior consumer banking reporter
Karen Bennett is a senior consumer banking reporter at Bankrate. She uses her finance writing background to help readers learn more about savings and checking accounts, CDs, and other financial matters.
