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Financial Literacy Month 2015: How To Create A Monthly Budget

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Donell Edwards, Blogger

DONED2014 SmallAbout Donell Edwards: Donell Edwards is President of CWR Media and is also founder and publisher of The College World Reporter (CWR) magazine and CWR World News & Information Service.  He is also a professional speaker, freelance writer, and entrepreneur.



We’re Celebrating Financial Literacy Month

Know Your Money
Tuesday – April 7, 2015

Financial Literacy Month 2015
How To Create A Monthly Budget
By Donell Edwards

How To Plan A Budget

Today we discuss how to develop a realistic budget, and the operative word here is, “realistic.”  Your budget must be realistic, not something contrived based on your feelings or emotions without doing the necessary research.  Therefore it is necessary to understand how you are spending your money, especially your discretionary income, before making a budget to ensure that all of your spending is included.  So keep a record of all of your spending for a month in a worksheet,  journal or tablet or electronic device.  You can see an example of such a worksheet at the SmartAboutMoney.org website, just click here.  Keep your journal or worksheet for at least 30 days.  Then use this information to create your budget.

Your budget must include everything that you spend during the month, and that is the purpose of the spending journal/worksheet.  So, in addition to your normal expenses such as your mortgage or rent payment, utilities, grocery, and vehicle payment and insurance, include all of the items from your spending journal/worksheet.  You may find the electronic budget worksheet available online from Kiplinger helpful in creating your budget, just click here.

If you have pocket change or use the ATM frequently for miscellaneous things during the week, make sure that this is included in your budget, and that you do not spend more than you have allowed in your budget.  A good practice is to give yourself an allowance for those things so that you know how much you have to spend, and you make sure that you do not spend more than you have allowed.  Your budget should be based on your normal income, not overtime that you expect to work, not bonuses you expect to receive, nor any tax refunds or anything other than your regular income.

Your total budget should not exceed your earnings or income.  If your budget exceeds your income, this is a serious problem and you need to immediately make adjustments in your spending, or if not possible to do this immediately, you need to work to eliminate unnecessary spending, pay off debt, and find other ways to reduce your budget over time so that it does not exceed your income.  Or, you may need to take on a second job temporarily or find other means to supplement your income until your budget does not exceed your income.  Understand that the purpose of the budget is to help you better manage your money.


Planning Budget


Learn and Apply the 50/20/30 Rule

What is the 50/20/30 rule?  It is an effective method of prioritizing your spending.  If you are not in a position to apply this rule at this time, it should be your goal to work toward applying this rule in your spending.  After you have developed your budget, divide everything into three separate groups: Essential Expenses, Financial Priorities, and Lifestyle Choices.

Essential expenses are generally the four major expenses; housing, transportation, utilities, and grocery.  Assign no more than 50% of your budget to this group of expenses.  These items are top priority and must be paid first.

Financial priorities are savings, retirement contributions, and debt payments.  Essential expenses should be paid first, then financial priorities should be taken care of.  Assign at least 20% of your budget to these financial priorities.  Financial priorities are very important, but cannot be taken care of until essential expenses have been paid.

Finally there are lifestyle choices, and these are your personal choices after you have taken care of the more important things in your budget.  This is what is known as “discretionary income” because it is what is left over after taking of your required expenses.  Lifestyle choices include but is not limited to hobbies, personal care, shopping, entertainment, charitable giving, pets, cable TV, Internet service, gym fees, etc.

Be aware that it may be necessary to make sacrifices and use great willpower to apply the 50/20/30 rule.  Because you may find that you do not have room in your budget at the present time for financial priorities, and if you do, then there may not be anything left for lifestyle choices which are very important to most people.  So, what can you do.  It is wise to focus on doing what you can at the present, and have the goal of working toward fully applying the 50/20/30 rule as soon in the future as you can manage.

One way to help you succeed in making the sacrifices you may need to make and exercising willpower is to identify your wants and your needs, and to spend accordingly.  Avoid making purchases just because it is a want and satisfies an emotional need, but stick to your budget and focus on your needs. Here is a great Wants vs Needs Worksheet from SmartAboutMoney.org to help you, just click here.  To be successful in managing money for some requires a different mentality and approach than one may have about money and spending.  The field of behavioral finance and neuroeconomics explores how we make economic decisions, and the role our mind plays in making those decisions.  So, it may be necessary to reprogram our minds to be willing to sacrifice and to develop willpower.

Understand that this is a process, it will take time, but in time, applying the 50/20/30 rule will help you effectively manage your finances and help you build a strong foundation for financial success.  A Realistic Budget Dictates What You Can Do With Your Money.

A detailed, realistic budget is a must in order to effectively manage personal finances.  So, if you do not have a budget, make it a priority today to sit down and take the time to plan your budget, and make the commitment to live rigidly within the budget you establish.


Here is today’s step to financial wellness from Thirty Steps to Financial Wellness developed by Money Management International:

Step 7 – Make Your Money Count



Hosting A Financial Literacy Month Event

2015 National Savings Forum

Financial Literacy Month Articles from Huffington Post 

The FoolProof Foundation

FoolProof Teacher

FoolProof Solo


If you have questions or need help we are just an email away.  Send your questions to Info@KnowYourMoneyGlobal.com


We Would Like To Hear From You.  Are There Any Brave Souls Out There Willing To Share?
If you would like to share with our readers how “bad” spending habits have affected you, anonymously or otherwise, for our upcoming special, “Confessions Of Spendaholics,” please send your experience to info@knowyourmoneyglobal.com.


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Disclaimer:  I have a Bachelor of Business Administration degree but I am not a financial adviser. However, I have acquired years of knowledge about personal money management through my life experience working through my own personal finances that allows me to share that knowledge with readers of Know Your Money. The Know Your Money Blog posts written by me are my own common sense observations and opinions and are for informational use only. Although my blog includes contributions from experienced financial professionals, please make your own financial decisions based on personal research or contact a financial adviser.


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