Manage your budget step by step

gérer son budget étape par étape

For the good management of your money, it is important to know where it is going. Do you know your expenses at your fingertips? How much do you spend each month? Have you established a monthly budget? Do you track your expenses to check if you are sticking to your budget? If you answered yes to any of these questions, then this article is for you! In this article, we will see the different tools to manage your monthly budget, but also and above all the different steps to establish it.

There are several tools for making a monthly budget. Here are 3 of them, with the pros and cons of each.

Monthly budget via an Excel table

This is the solution that I prefer, an Excel budget table that allows you to quickly and efficiently make a monthly budget. It is very practical, it is still necessary to master a minimum of the tool. The advantage of this type of tool is that it is flexible: you can add boxes with new expenses, new income, etc. Of course, you have the option of automatically calculating your balance. Disadvantage: you will have to list your expenses and income on the table yourself, which can take a little time each month. But in terms of flexibility, it’s the tool I prefer to establish my monthly budget.

You are also lucky because I have created an Excel budget table that you can download by clicking below:

Download my Excel budget table

Monthly budget via a smartphone app

For people connected, it is a good alternative to the Excel file table. The advantage of budget management applications is that they are directly synchronized with your bank accounts. The budget is established semi-automatically. Expenses will be placed directly in the various expense items and in the blink of an eye, you can see where your money is going. Despite everything, I see 2 drawbacks to budget management applications: you have to enter your account login information (what about security?) and flexibility level, if you want to create expenditure items, for example, it’s often paying. Indeed, this type of application works with a subscription system – which is not very expensive most of the time, it is true.

I use this type of application more for the notification function of the balances of the various accounts and the direct debits. I am notified daily of where the balance is for each of my accounts, and I am also notified when a debit of a certain amount (which I can define) passes through my account.

Applications are ideal for day-to-day management, to know where you are in real-time. But it’s not ideal for setting a monthly budget.

Having tested several budget management applications, here are the 2 that I recommend: Bankin and Linxo.

Monthly budget via a sheet of paper

I still see far too many people making a monthly budget on a sheet of paper… I obviously don’t recommend that.

Why, will you tell me?

Quite simply because you risk losing the sheet… And you will also tend to make erasures. The sheet can quickly become unreadable! So I really don’t recommend setting up your monthly budget on a sheet of paper. Opt instead for the application or the Excel table. If you still want to opt for paper, prefer a kakebo to the good old sheet of paper. The kakebo is an account book of Japanese origin that is very popular there.

After seeing the different tools to use to establish a monthly budget, we will get to the heart of the matter, namely how to establish a budget.

Step 1: List your expenses and income

The first step is to list your income… and especially your expenses! You will report these expenses and income directly on your Excel budget file.

Your income is as follows:

  • salary,
  • rental income,
  • dividends,
  • allowances,
  • alimony.

And your expenses are as follows, namely, there are 3 types.

Fixed expenses

Fixed expenses are all expenses that you are obligated to pay each month. They are generally debited directly from your account:

  • rent,
  • real estate loan,
  • consumer credit,
  • insurance,
  • taxes,
  • mutual,
  • operators (water, electricity, Internet, telephone, etc.),
  • child care.

Variable expenses

It is often these expenses that put a strain on your budget because they do not represent a fixed amount. It is this type of expense that you need to watch like milk on fire.

Those are :

  • races,
  • shopping,
  • vacations,
  • leisure (cinema, restaurant, culture, etc.),
  • gasoline.

Exceptional expenses

Exceptional expenses are all unforeseen expenses.

Those are :

  • repair your car,
  • change a fridge that has failed…

Step 2: Categorize your expenses and income

At this stage, you will categorize your expenses: put your exceptional expenses in the category dedicated to exceptional expenses, your variable expenses in variable expenses, and fixed in fixed.

When you list each expense and each income, the Excel table will calculate for you the total amount of your expenses by type of expense and the total amount of your income.

You will see where your money is going. You will see that it is very instructive!

Step 3: Calculate your provisional monthly budget 

Now that you have all your expenses, and especially all your income, you will be able to establish a provisional monthly budget.

For this, we will use the 50/30/20 rule.

In concrete terms, this rule consists of budgeting your expenses according to your income. The rule tells us that you must spend a maximum of 50% of your income on fixed expenses, 30% on variable expenses, and save 20% of your salary.

Let’s take an example: you have 3000€ of income in your family, then you must spend a maximum of 1500€ for fixed expenses, 900€ for variable expenses, and save 600€ per month.

Here is a quick way to calculate a percentage:

3000€ x 0.5 = 1500

3000€ x 0.3 = 900

3000€ x 0.2 = 600

This rule isn’t written in stone, it’s just a quick and easy tool for calculating a budget. For example, you can budget in this way 50% fixed expenses, 40% variable expenses, and 10% savings; or 40% fixed expenses, 50% variable expenses, and 10% savings.

The only thing that should never vary is to save at least 10% of your income. The ideal would even be, as recommended at the beginning, 20%.

But there, you are going to tell me what about exceptional expenses? How to pay them then? Your precautionary savings are there for just that! Exceptional expenses should “never” be paid with income from your account, but only with your precautionary savings. It is considered that the precautionary savings must be at least 6 months of charges, and the ideal would even be 1 year. In the event of a hard blow or the unexpected, you use your precautionary savings to pay for this exceptional expense, while subsequently replenishing the precautionary savings.

Step 4: Calculate your actual monthly budget

Calculating a provisional budget is one thing… and calculating an actual monthly budget is another! For information, the table I provided at the beginning of the article will calculate your budget for you.

You will see that the budget calculation is very simple:

Income – (fixed expenses + variable expenses) 

You see, it’s very simple! If you’re negative, you’re spending too much. If you’re in balance, that’s good… And if you’re at +€100 (savings included) at the end of the month, that’s great!

Are you at 0 or worse, in the negative?

It would then be time to make sure to reduce your expenses, especially fixed expenses.

How?

For example, you will have your mortgage renegotiated with your bank, whether it is the rate or the insurance, or you will have it bought out by another bank (which is often more advantageous).

You will be able to compete for your contracts: telephone, Internet, electricity, insurance…

We never do it, often for lack of time or laziness, but there is a way to save a lot of money. Operators often court new customers and therefore offer very aggressive prices. By changing regularly, you can save a lot of money.

If you don’t want to manage this alone, you can go through a site like ideal which will take care of all this for you. This type of site will compare the best offers, and terminate and open new contracts for you, all for free.

Just with this type of contract, you can easily save a hundred euros.

And for variable expenses, how to do?

Once the fixed charges have been reduced, we must look at the level of variable expenses, which are most of the time the culprits of poor management of personal finances. Here are some tips to reduce this type of expense. Holidays, for example, can be included as a fixed expense, after reducing these. That’s what I do myself: every month I put a fixed amount allocated to holidays. You can put this money in a booklet A or an LDD.

So when I’m looking for my next vacation, I do it according to the budget I have set aside. By doing this, it is more difficult to pay more than expected!

For groceries, I have budgeted a fixed amount each month, which I transfer to an account dedicated to groceries. To do this, I opened an N26 account (which is totally free) and I pay for my shopping with this account. The advantage is that with this type of account, I receive my balance in real-time, I know where I am from day to day and I can therefore be more careful. Whereas with a classic account, it can take several days before your expenses appear… This lag is often very bad for the sake of budget management!

For recreation, it is similar to shopping. I have another N26 account (also free) and I pay for my leisure activities (restaurant, shopping, etc.) only with this card. There again, thanks to the immediate debit card, I know where I am from day to day. It is therefore easier not to exceed your budget dedicated to leisure!

What about exceptional expenses?

As mentioned just before, this type of expense must be paid only with your precautionary savings and never with the money that is in your current account.

Step 5: Follow your monthly budget

Now that you have calculated your forecast and actual monthly budgets, we will see how to follow your monthly budget. Well, it’s very simple! With the Excel budget file that I gave you at the beginning of the article, you will be able to add a second box for each month. Just add a column and copy/paste the current column. However, you will call the left column the forecast monthly budget and the right column the actual monthly budget.

You can already fill in the provisional monthly budget section for the 12 months. Then, each month, you will meet your actual budget when due. Do you want to add your expenses for the month of January? Do it on February 1 to be sure to list all expenses.

Thanks to this type of table, you will be able to compare whether, between the forecasts and the actual expenses, your budget is well followed. By doing this, you will also see what types of expenses are undermining your budget estimate and can act on it.

It’s up to you now!

Did this article help you better define your monthly budget? Have you already implemented the techniques proposed in the article? How to manage your monthly budget? Do you have questions about monthly budget management? Respond in the comments.

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