How to Make a Monthly Budget in 5 Steps
It is great to know that, like us, you are looking into how to make a budget. Having a budget and reducing costs means less work, less stress, and more time for travel and for what matters to you most. Whether you’re looking to simplify your life, or just to get out of debt, this article will help you reach your goals!
The best things in life are free, the second best are really expensive. Don’t settle for second best!
To be able to budget-travel, we have to make and maintain a budget. We did that in Canada, when abroad, and we do it here in Nepal too. Our crowning glory in budgets was when we challenged ourselves to live on a dollar a day for a month (all and all, including our Internet and rent and everything else, our total budget was about $1.70 per day). Obviously the most strict budget we have ever adhered to, it helped us to see clearly the fundamentals of making a budget. We recently completed our living on a dollar a day challenge. So, we decided to share what we have learned about making a budget with you while it is still fresh in our minds. Here is our list of expenses for one person during that month: (For rent, add 6000 NRS and for Internet, add 2500 NRS)
If you haven’t already, definitely check out our eBooks which include many budgeting tips.
10 LifeHacks for Long-Term Budget Travel (free with email subscription) and 40 LifeHacks That Save Over $2000/Month (it costs $4.99, but even if it it saves you $100/month, it’s definitely worth it).
How to Make a Budget
The secret for anyone to save money and reduce expenses is to develop a reasonable budget. Then of course, one has to have enough self-control to stick to the budget, being reasonable about what are really needs and what are just wants.
First, you have to control your spending so that you are not exceeding your income by your spending. If you are, you are in what we call “debt.” We have been there, and it is a nasty place to visit. We recommend not going there, but if you are going to go there, don’t stay too long! The first 2 steps in making a budget are with the goal in mind of controlling present spending. If you want to figure out how little you can reasonably live on, then you can skip down to Step 3.
By following these steps, you can find out whether you can reduce your hours, change jobs, go part-time, etc.
Step 1: Establish monthly income.
Add all of your families employment income coming in each month. To stay out of debt, that figure is what you will need to stay within. You may have to go with an average total if it fluctuates between months.
Step 2: Make a savings budget.
You will want to make sure you are setting a good size chunk of your budget for savings. This can be for emergencies and unknowns, but also for travel. If you are eating up all of your income within the month just staying at home, then this ties you down, making it near impossible to free yourself for traveling. After figuring out your monthly savings, whatever is left will be for your monthly expenses.
If you are making a budget just to figure out how much you can reduce expenses as opposed to basing it off of your income, start here at Step 3.
Step 3: Separate needs from wants.
This is where you have to get real with yourself. Needs include housing, transportation, recreation(yeah, we need it) and food, along with occasional necessities such as toiletries, cleaning supplies and new clothes. Very often, your wants will overlap with your needs. For instance, you need to eat, but you don’t need to eat in a restaurant all the time. You need clothes, but not necessarily Gucci or Armani. You need a haircut, but not necessarily for $100. Additionally, recreation and entertainment can often be done for free. We take a lot of time on this step, challenging ourselves to be resourceful and enterprising, in order to reduce the costs of our needs, downsizing as much as reasonable. After you’ve reduced somewhat, take a look at it over again. Really crunch! Feel the burn!
Here is a breakdown of a monthly budget in Nepal that we have used in the past. This is a basic budget without our visa or vlogging expenses included. There is no savings either. It is a bit skimpy on food as well, so we can’t really do it anymore to be reasonable with our needs, but it’s possible for others on a long-term basis. It is 20,000 NRS or about $200US budget total for two people.
Monthly Budget in Nepal
Step 4: Enforce budget.
You can put the total budget of cash in envelopes, and take out of it when needed. That’s the classic budget approach. This gives you a tangible consciousness of the money you are spending. But if you only use cards and no cash, Step 5 will be specially important for you.
Step 5: Download and customize a budget app.
I recommend Goodbudget, because it is available for Android and Apple, and the free version is easy to use and customizable enough to meet your needs. You can separate your budget categories such as rent, transportation, food, misc., etc. Then you set your monthly budget for each category. Each time you make a purchase, you enter the amount into the appropriate category and any notes like where and what it was. This helped us see we were spending too much on coffee breaks when we were in Canada.
The app tells you if you are either so many dollars ahead of budget or if you are over budget and how much you’ve gone over. It will say how many days you are ahead or behind schedule. This is a great feature, because it has helped me to try to save more say on food for a few days, so that I can enjoy a treat one day with the money I saved on other days.
Enjoy the Rewards!
There is a really rewarding sense of accomplishment when you successfully keep in a tight budget. It takes self-control, adaptability, thriftiness, good organization, and creativity. My favorite part is planning what to do with the savings we set aside during the month. A nice treat, travel, or finally being able to afford something we had our eyes on. A reward for the work well done! Live smart! Travel smart!
If you have some budgeting tips you would like to share, let us know in the comments!