How to make a budget in 5 steps

To make a budget: (1) work out your monthly take-home pay, (2) list your fixed bills, (3) choose how much to save, (4) split what’s left into spending categories or a daily limit, and (5) track every expense and review at the end of the month.

1. Work out your take-home pay

Use what actually lands in your account each month after tax. If your income varies, use your lowest month from the last six, so the budget still works in a slow month.

2. List your fixed bills

Write down everything that costs about the same every month: rent, utilities, phone, internet, insurance, subscriptions and minimum debt payments. For bills paid yearly, divide by 12 and include that monthly share.

3. Choose a savings amount

Decide how much to set aside before you spend anything. A common starting point is 20% of take-home pay (the “20” in the 50/30/20 rule), but any regular amount is better than none. Move it on payday.

4. Split what’s left

Take-home pay minus bills minus savings is your spending money. Either give a few categories a limit (food, transport, fun) or simply divide it by the days in the month to get a daily limit. The budget calculator does this for you.

5. Track as you go, then review

A budget only works if you know what you’ve spent. Log each purchase when it happens, check your remaining amount once a day, and at month end compare plan vs reality. Adjust next month’s numbers; expect the first two or three months to need changes.

Common mistakes

• Forgetting irregular costs: birthdays, car repairs and annual fees. Add a small “irregular” category.
• Too many categories: six to eight is plenty to start.
• Quitting after one bad week: overspending once isn’t failure. Carry on and adjust.

Do it on your phone

Pocketify lets you set a monthly budget and category limits, log spending in two taps, and see what’s left, privately on your Android phone.