How to budget in 6 simple steps - Step 5

A budget is a plan you make to spend your money. Budgeting stops you overspending, helps you save to reach your financial goals and, contrary to popular opinion, actually gives you the freedom to spend money on the fun stuff!

The process is quite straightforward and requires you to sit down at the end of every month to budget for the month ahead. It may take a few months to understand the process fully but after that, it's a cinch.

In this 6-part series, you'll learn how to create a zero-based budget and these six steps you need to follow to budget on a monthly basis:

1 | Manage your bills with a Bill Register

2 | Record your income on an Income Tracker

3 | Reduce your debt with a Debt Tracker

4 | Save money with a Savings Tracker

5 | Create a Monthly Budget

6 | Track your spending with a Monthly Expenses Tracker

Yesterday we covered step number four with the Savings Tracker. Today is step number five, the Monthly Budget.


Step 5 | Monthly Budget

Setting a monthly budget can take time but the good news is that you’ve already done most of the hard work. Now that you have all the information you need, you can create your monthly budget.

This Lorna Leigh Lane Monthly Budget & Expenses Kit contains 12 blank budget sheets, one for each month of the year, plus a blank expenses sheet for each month as well.


How to set a monthly budget

Gather the documents you've completed this week:

Then complete your Monthly Budget page as follows:

INCOME: Using your Income Tracker, write down the types of income you expect to receive next month under INCOME and the amount you expect to receive in the BUDGET column. Another, way to do this is to write down the income you received last month and budget to that instead. This way you’re never living outside of your means. Calculate your income total and put that figure at the bottom of the column – your expenses will need to equal this amount exactly.

CATEGORY: Using your Bill Register to help you, list your budget categories under the CATEGORY column.

EXPENSE: Still using your Bill Register to help you, list your budget expense items under the EXPENSE column.

For example, the category is ‘Transport’ and the expense is ‘Fuel’.

Some ideas to help you are:

  • TRANSPORT - car repayments, fuel, vehicle repairs, public transport

  • UTILITIES - rates, water, gas, electricity

  • INSURANCE - car, home, health, life

  • FOOD - groceries, takeaway, eating out

  • ENTERTAINMENT - games, movies, tickets

  • CLOTHING - adult clothes, kid clothes

  • MEDICAL - doctor, dentist, specialist, pharmaceuticals

  • EDUCATION - school fees, uniforms, school supplies

  • HEALTH - sport fees and equipment, gym memberships

  • HOME - mortgage payments, rent, repairs, furnishings

  • PERSONAL - hair and beauty treatments, cosmetics

  • GIFTS & DONATIONS - birthdays, Christmas, other gifts, charity

  • SAVINGS - holiday savings, Christmas savings, emergency savings

Where possible, groups expenses together to keep your budget as simple as possible.

BUDGET: Write the amounts you will spend on each item in the BUDGET column, ensuring the total at the bottom exactly equals your income total. In other words, every cent you earn will be spent (or saved). The best way to do this is to begin with your regular bills, then put your debt payments and savings contributions, then add the more important variable expenses (such as groceries and savings) and finally attribute the rest to the fun stuff (like entertainment).

ACTUAL: At the end of the month, calculate what you actually spent in each category and enter these amounts in the ACTUAL column.

DIFFERENCE: Then calculate and write down the DIFFERENCE between your budgeted amount and the amount you actually spent.


What if your monthly budget doesn't balance?

If you have leftover money at the end of the month, you can contribute it to paying off any debts that you have. If you don't have any debts, you can roll it over to next month's budget so you have a little more to spend there. Alternatively, you can save the money by putting it towards one of your savings goals so that you'll reach it sooner. In the example above, there was $369.73 leftover at the end of the month so it was added to the EMERGENCY SAVINGS contribution for that month to balance the budget.

Similarly, if you end up overspending for the month, you can rollover that deficit to next month's budget and try to underspend by that amount.


Budgeting is easiest with templates that you can re-use each month so you can get into good financial habits.

The Lorna Leigh Lane Home Budget Ultimate Planner Kit contains Monthly Budget templates and more including pages to create monthly budgets and track your spending as well as debt repayments and savings tracking pages.

To get your Home Budget Ultimate Planner Kit click the button below below and give zero-based budgeting a try.

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Read on here for the final Step 6 | Monthly Expenses.

Happy planning!