Example Of A Monthly Budget? How To Cut Back Extra Expenses

Last updated on February 16th, 2024 at 05:48 am

If you’re making a personal budget first time it’s important to see an example of a budget.

This gives you a visual picture of what categories and expenses to include.

Along with that makes your job so easy because of a prepared template.

You can easily customize it to fit your situation. 

You also get to know what each category means and how to cut back the unnecessary ones. 

In this post, you’ll get every bit of information including a sample budget, budgeting templates, and a brief explanation of budgeting categories plus FAQs. 

So let’s dive into the post…


What is Budgeting in Personal Finance?

It’s a process of creating a detailed estimation that outlines your income and expenses. Here you assess your financial situation and set financial goals. In addition to that you allocate your income towards various expense categories. For example, housing, transportation, food and groceries, debt, entertainment, and savings.

With the help of budgeting, you gain a clear view of earnings and spending. It allows you to prioritize your expenses, cut back extra expenses, do saving, and make sound financial decisions.

For making an accurate budget, first, you track your income and expenses. In the second step, you allocate a specific amount of money to each expense. In the last step, you subtract total expenses from total income so that you know exactly how much money is left. 

The total income includes all the sources including full-time job, part-time pay, dividends, interest, capital gain, and any other side hustle. The expenses include all the fixed and variable. We get into more details later in this post. 

After subtracting if your figures are positive that means your budget is surplus. You can devote the remaining money towards emergency savings and investments. While if it’s negative that means your expenses or spending are more than earnings. Now you have to either reduce certain expenses or say block the money leakage. Another way is to increase your income. 

Why Budgeting is Important in Personal Finance?

Budgeting is a key part of money management. It has a significant contribution toward individuals’ well-being and financial success. 

Here’s why budgeting is important for you:

1. Financial Awareness 

You gain a clear picture of your financial situation. When you track your income and spending then you know exactly how much cash flows in and out. So this helps you become intelligent about how you spend money. 

2. Setting Financial Goals

Helps you to set specific financial goals and work towards achieving them. Whether you want to save for a house down payment, pay off debt, or emergency fund, a budget helps. 

3. Expense Management

By categorizing, listing, and tracking your spending, you can identify areas to cut back. This enables you to make adjustments, reduce extra expenses, and prioritize savings.

3. Debt Reduction 

A valuable tool for tackling and reducing debt. Because you can allocate the remaining funds toward paying off credit cards or student loans. Here you can use debt snowball and debt avalanche methods to achieve faster reduction.

4. Saving and Investing

You can build a regular savings habit and set aside money for future needs and goals. Whether you’re saving for retirement, vacation, or a major purchase, it helps you set aside money.

5. Financial Security 

Handling emergencies without relying on credit or going into debt, becomes so easy. You set aside extra money towards the emergency fund. And after a specific time frame depending on your income you no more need a credit card to cure sudden cash needs. It also releases financial stress. 

6. Increases income

With surplus budgeting, you can divide the remaining money into savings and investments. With the help of investing you can increase monthly income. For example, if you start investing 300 to 500 per month towards dividend stocks or high-yield savings, it starts generating dollars in return. 

Why Do You Need To See An Example Of A Budget? 

Seeing an example of a budget can be highly beneficial for creating and structuring your budget. Here’s why you need to see an example:

An example budget provides you with a visual representation of how a budget is organized. 

Demonstrates how real-life financial situations can be translated into a budgeting framework. Shows you how to allocate your income towards various expenses and savings.

You understand how to allocate funds to different expense categories. You can observe how much is typically set aside for needs, wants, and savings. 

It’s a starting point that you can customize to suit your unique financial situation and goals. 

It provides a tangible representation of how a budget can help you achieve financial goals and aspirations.

Example of a Monthy Budget

Let’s see the budget example to help you get a clear picture of how a personal budget works. Along with that what you can expect to include in it.

Note: The income used is after-tax income or disposable income.

So here it is:

Name Of The Budget CategoryAmount Of Money (In $)
Total Income $4,500
Fixed Expenses:
Rent and Mortgage$1,400
Utility Bills$200
Internet and Cable$120
Phone or Cell Phone Bill$80
Online Subscriptions$80
Variable Expenses:
Food and Groceries$400
Medical $100
Home Maintenance and Repairs$100
Gifts and Occasions$50
Personal Care and Clothing$100
Dining Out$150
Vehicle Maintenance and Repairs$200
Household Supplies$50
Personal Care and Clothing$100
Total Expenses$3,780
Debt Repayments:
Credit Cards$100
Personal Loan$100
Student Loan$150
Total Loan Repayment Expense$350
Savings and Investments:
Savings $370
Dividend Stocks

This example of a budget doesn’t include all categories but enough or you to understand the overall structure of a personal budget. It’s a good starting point for you to create your budget from scratch.

Here first you’ve to list all your income sources then add them to find total income in a separate row. Then go towards expenses and list your fixed and variable expenses with amounts and find total. In third step list your different debt repayment expense if any and find their total. In fourth step find the difference by subtracting total expenses from total income.

If the remaining balance is in positive figures that means you’re doing your best. You have money left for savings or investment. But if the resulting figures are negative that means either you’re spending too much on any expense or have useless expenses that are eating out money. In that case cut back money on unnecessary and overspending. Another way is to increase your income by doing a part-time work, switching a job, or starting a side hustle.

Let’s jump on to the next section…

Important Categories In An Example Of A Budget

There are four main budgeting categories. These categories help you track your income, expenses, and savings. Here they’re:

1. Income

Includes all sources of income, such as your salary, wages, freelance work, rental income, or any other money you receive. List each income source separately with the correct amount you expect to receive within a given time frame (monthly or biweekly).

2. Fixed Expenses

These expenses remain the same from month to month. They include essential items that you must pay regularly, such as: 

rent or mortgage payments

utility bills (electricity, water, gas)

insurance premiums (health, car, home)

loan repayments (student loans, car loans)

3. Variable Expenses

These costs may change from month to month. Variable expense items include: 


dining out


transportation (fuel, public transportation fares)

personal care and clothing 

household supplies

4. Savings 

It’s crucial to allocate a percentage of your income towards savings and work toward your long-term financial goals. This category includes contributions to your savings account, retirement savings (such as 401(k) or IRA), investments, or any other savings vehicles. 

5. Debt Payments

If you owe a debt, create a separate category for its payments. Include your minimum monthly payments for credit cards, student loans, or personal loans you’re working to repay. If possible, consider allocating extra funds towards debt repayment to reduce interest costs.

6. Miscellaneous/Unplanned Expenses

Setting aside a small amount for miscellaneous or unplanned expenses is a good idea. This category can cover unexpected costs, such as medical expenses, minor repairs, or any other sudden financial needs. Having a buffer for these expenses helps prevent them from derailing your budget.

You can exclude or include categories as you want. This not a rule of thumb to use all of these. For example, you may not include a debt category if you’re debt free.

RELATED POST: How to Create a Personal Budget [6 Easy Steps] PLUS Template

What are the different budgeting methods?

Let’s explore various budgeting methods in personal finance to help you make a budget:

1. Traditional Budgeting Method

Here you prepare a detailed budget by listing all income and expenses. Along with that, you track spending and make adjustments as needed. The major focus is on allocating funds to different expense categories considering your income and financial goals.

2. The 50/30/20 Budget Rule

Here you allocate 50% of your income toward needs, 30% towards wants, and 20% towards savings or debt repayment.

3. The 60/30/10 Budget Rule 

Similar to the 50/30/20 rule, here you allocate 60% of your income towards needs, 30% towards wants, and 10% towards savings or debt repayment. Sometimes for heavy focus on savings, you reverse it and save 60%, spend 30% on needs, and 10% on wants.

4. The 70/20/10 Budget Rule

In this method, you assign 70% of your income to needs, 20% to wants, and 10% to savings. It emphasizes a higher allocation towards savings.

5. The 80/20 Budget Rule

Here you allocate 80% of your income towards needs and 20% is set aside for savings and investments. 

6. The 40/40/20 Budget Rule

This method suggests assigning 40% of your income toward needs, 40% towards wants, and 20% towards savings or debt repayment.

7. The 75/15/10 Budget Rule

With this method, you allocate 75% of your income toward needs, 15% towards savings, and 10% towards wants.

8. Zero-Based Budget

It requires you to assign every dollar of income to a specific category or purpose, leaving no money unallocated. It ensures that your income minus expenses equals zero, thereby accounting for every dollar.

9. Pay-Yourself-First Budget

This budgeting method put more pressure on prioritizing savings. It states that you allocate a certain amount of income towards savings or investments before paying other expenses.

10. Envelope System Budget

Using this method, you take envelopes and write the names of each specific category of expense on individual envelopes. After that, you allocate cash for different expense categories and place them in separate envelopes. 

After that, you spend money from each envelope of the category and stop when the envelope gets empty. You no more spend on that specific category. This method helps control spending and encourages mindful financial habits.

RELATED POST: Cash Envelope System: 9-Simple Steps To Do Envelope Budgeting

11. The ‘No’ Budget

It involves a conscious decision to cut back on discretionary spending and useless expenses by saying ‘no’ to non-essential purchases. It enforces frugality and saves money.

12. The 60/40 Budget

This rule states that you allocate 60% of your income toward needs and 40% towards wants, discretionary spending, and savings.

Each budgeting method above has its advantages and suitability. Their use depends on your financial goals, income level, and personal preferences. It’s important to choose a method that best aligns with your needs and helps you manage your money.

What are budgeting percentages? 

They refer to the suggested ratios of your income that you allocate to various expense categories while making a budget. These percentages can serve as guidelines to help you structure and balance your spending and savings. Here are some common budgeting percentages you may come across in the above example of a budget:

1. Housing

Housing typically ranges from 25% to 35% of your income. This includes rent or mortgage payments, insurance, property taxes, and utilities.

2. Transportation

The general suggestion is to put 10% to 15% of your income into transportation expenses. This category includes fuel, vehicle payments, maintenance, insurance, and public transportation costs.

3. Food

Budgeting experts often suggest allocating 10% to 15% of your income to food. This includes groceries, dining out, and any other related food expense.

4. Savings and Investments

It’s important to prioritize saving and investing for future goals. Budgeting recommendations typically suggest allocating 10% to 20% of your income to savings and investments.

5. Debt Payments

If you owe a debt, it is advisable to allocate 10% to 20% of your income for repayment. The percentage depends on the amount of debt you need to tackle.

6. Personal and Discretionary Expenses 

This section covers expenses such as hobbies, shopping, entertainment, vacations, and personal care. Budgeting percentages range from 10% to 15% of your income.

7. Health and Insurance

Allocating around 5% to 10% of your income to health-related expenses is a good idea. This includes health insurance premiums, co-pays, and medical bills.

Things to remember before making a personal budget 

Here are some key points to remember before making a budget:

1. Track Your Expenses

Before making a budget, track your expenses for a few months. This helps you to get an accurate picture of your spending habits. Along with that help, you identify where your money is going and where you can potentially make adjustments.

2. Set Clear Goals

Determine your short-term and long-term financial goals. Whether it’s paying off debt, saving for a house down payment, retirement planning, or buying a car.

3. Assess Your Income

Analyze your income sources and find how much money you coming into your pocket. Consider any irregularities in your income and adjust them to your budgeting strategy.

4. Differentiate Needs From Wants

Prioritize your spending on needs like housing, utilities, and groceries. Allocate funds to wants judiciously based on your financial capacity and goals.

5. Be Realistic

Make sure your budget is realistic and aligns with your current financial situation. Avoid overestimating your income or underestimating your expenses. Be honest with yourself about your spending habits and set achievable targets.

6. Prepare for Emergencies

Include an emergency fund in your budget to prepare for unexpected expenses. Aim to set aside a certain amount each month to build a fund equal to six months of expenses.

7. Be Flexible and Adaptable

Understand that your budget may require adjustments over time. Life situations, income changes, or unexpected events can impact your financial situation. Remain flexible and adapt your budget as needed to stay on track and accommodate new circumstances.

8. Involve All Household Members

If you share financial responsibilities with others, such as a spouse or partner, involve them in the budgeting process. Ensure everyone is aware of the financial goals and actively participates in managing the budget.

9. Regularly Review and Revise

Your budget is not a one-time exercise. It should be reviewed and revised regularly to reflect any changes in your income, expenses, or financial goals. Set aside time each month or quarter to assess your progress and make adjustments.

10. Stay Disciplined

Stick to your budget as closely as possible. Avoid impulsive spending and unnecessary expenses that can derail your financial progress. Maintain discipline and keep your long-term goals in mind to stay motivated.

What is a zero-based budget?

In this budgeting method, you assign every dollar of your income to a specific task. You ensure that your income minus expenses equals zero. In other words, you allocate your entire income down to zero, leaving no money unused. 

RELATED POST: How to do Zero-Based Budgeting Using 5 Simple Steps?

What is an operating budget? 

An operating budget outlines the projected income and expenses of a business over a specific period. It provides a detailed overview of expected revenues, costs, and profitability. 

What are fixed and variable expenses in a personal budget? 

In the example of a budget, there are two types of expenses: fixed expenses and variable expenses. Understanding the difference between these two categories is essential for effective budgeting. 

Here’s an explanation of fixed and variable budgeting expenses:

Fixed Expenses

These are costs that stay the same from month to month and are often considered essential. These expenses have fix amount or a predictable range. 

Examples of fixed expenses include

Rent or mortgage payments

Loan repayments (e.g., car loans, student loans)

Insurance premiums (e.g., health, life, auto)

Utility bills (e.g., electricity, water, internet)

Subscription services (e.g., streaming platforms, gym memberships)

Property taxes or homeowners association (HOA) fees

Variable Expenses

These costs fluctuate from month to month and are often discretionary. They can change based on your choices, needs, and lifestyle. 

Examples of variable expenses include:

Groceries and dining out

Entertainment (e.g., movies, concerts)

Shopping (e.g., clothing, electronics)

Transportation costs (e.g., fuel, public transportation)

Personal care (e.g., salon visits, spa treatments)

Travel and vacations

What is corporate financial budgeting? 

The process of planning and allocating financial resources within a company. It involves creating an in-depth financial plan that outlines projected revenues, expenses, and investments for a specific time. 

Important personal budgeting tools

The above example of a budget is a good starting point for you to create your own budget but there is a problem. It takes a lot of your time to make it manually using pen and paper. So here comes budgeting tools to help you become more efficient at this job.

Here are some important tools that make your job easy:

1. Spreadsheet Software

Spreadsheets offer a versatile and customizable platform for creating and tracking your budget. You can create budget templates, input your income and expenses, categorize transactions, and calculate totals. Also allows you to tailor your budget to your specific needs and make adjustments as required.

2. Budgeting Apps

Several budgeting apps are available for smartphones and tablets.

These apps often offer features such as 

expense tracking

budget categorization

bill reminders and goal setting

progress monitoring

Popular budgeting apps include Mint, You Need a Budget (YNAB), PocketGuard, and Wally. Some are free while others are paid.

RELATED POST: 10 Best Budgeting Apps of 2022 (Free + Paid)

3. Envelopes

The envelope system is a simple and tangible budgeting method. You assign specific categories to envelopes and allocate cash accordingly. Each envelope represents a different expense category, such as groceries, entertainment, or transportation. If you’re using envelope system budgeting then buying envelopes is important. 

4. Expense Tracking Apps

These apps help you record and categorize your expenses. These apps often provide features like receipt scanning, expense categorization, and spending analytics. 

They enable you to monitor your spending habits, identify areas where you can cut back, and stay within your budget. Examples include Expensify, Receipt Bank, and Zoho Expense.

5. Budgeting Templates

They include predefined categories and formulas to calculate totals and differences. You can find budgeting templates online or within spreadsheet software like Microsoft Excel. These templates can save time and guide for making a budget.

RELATED POST: 31 Downloadable Printable Monthly Budget Template (Excel + Pdf)

6. Financial Aggregators

These are online platforms that help you consolidate and view all your financial accounts in one place. They gather data from your bank accounts, investments, credit cards, and loans, giving you a broader view. Examples of financial aggregators include Personal Capital and Mint.

What is the best personal budgeting software? 

Here are some popular choices you can consider:


You Need a Budget (YNAB)

Personal Capital



For getting information on other best budgeting software you can visit the related article below.

RELATED POST: 31 Budgeting Tips for Beginners to Easily Grow Your Savings

Tips for cutting extra expenses in a budget

There may be money leakage due to extra or unnecessary expenses. This helps you stay on budget and save more money. 

Here are some amazing tips from above example of a budget:

1. Housing Expenses

Consider downsizing to a smaller and frugal home or apartment. Look for opportunities to refinance your mortgage to secure a lower interest rate. Explore the possibility of renting out a spare room to generate additional income.

2. Transportation Expenses

Use public transportation or carpooling to reduce fuel costs and save on parking fees.

Evaluate your insurance coverage and shop around for more competitive rates.

Consider downsizing to a more fuel-efficient vehicle like a bike or walking for shorter distances.

3. Groceries and Dining Out

Plan your meals and keep a shopping list to avoid impulse purchases. Along with that buy in bulk and take advantage of discounts. Cook meals at home and limit eating out because it’s 5 times more expensive.

4. Entertainment and Recreation

Look for frugal entertainment options. For example, local community events, parks, and libraries. Cancel subscriptions to streaming services and platforms you don’t use. Take advantage of coupons for movies, concerts, or events.

5. Personal Care and Beauty

Cut back on salon visits and find cheap options for haircuts or styling.

You can consider DIY options for manicures, pedicures, or other personal care routines.

Look for discounts on beauty products and cosmetics, or try more budget-friendly brands.

RELATED POST: 59 Ways on How to Save Money Even If You Find it Difficult


So you saw an example of a budget to create your own. 

You learned about different budgeting categories and what they mean. 

Along with that, you learned how to cut back expenses and save more money. 

Your budget requires discipline and regular review. Make adjustments and ensure that your spending aligns with your financial goals. 

By sticking to a budget, you can gain better control of your money, reduce debt, and save for emergencies.


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