As we start a new year, budgeting can be your best tool for success. It’s not just about tracking your spending—it’s a practical way to achieve your goals and reduce financial stress.

Whether you’re focused on paying off debt, building an emergency fund, or saving for a big trip, a well-planned budget helps you stay on track. Taking control of your finances now can set you up for a more confident and secure year ahead.

Keep reading to learn how to create a monthly budget and discover some of our top financial tips.

How to Create a Budget for Beginners

Here are the five main steps to creating a successful budget: 

1. Calculate Your Total Income 

Calculate your net income (after taxes, employee benefits, and any other deductions). If you are a freelancer, contractor, or self-employed, keep track of your income and contracts. 

Add up any other sources of income, including investments, rental earnings, or freelance gigs. Be sure to account for irregular income streams by estimating an average over the past few months. 

2. Track Your Spending

Once you know how much money you earn, the next step is to see how much you spend and what you spend it on. Tracking and categorizing your expenses can help you see what you’re spending the most on and where you can likely save. 

Record your daily spending for at least one month. We recommend using a spreadsheet, online template, or even pen and paper. Tracking your spending for the first time can be overwhelming, so use whatever’s handy. 

Group your fixed expenses together. This includes monthly bills like rent or mortgage payments, phone and internet bills, subscriptions, car payments, and utilities. 

List your variable expenses that change from month to month, such as groceries, eating out, entertainment, gas, and anything else you spend money on throughout the month. You can often find opportunities to cut your spending here, as you might see that you spend quite a lot on eating out or getting coffee.

3. Set Achievable Goals 

Once you have a clear understanding of your income and expenses, it’s time to set some short-term and long-term financial goals. 

Short-term goals can usually be achieved within a few years and can include paying off credit card debt or creating an emergency fund. Longer-term goals can take much longer and can include saving for retirement or your children’s education. 

Focus on achievable goals that align with your priorities. Break these goals into smaller steps, like putting $200 a month into your savings account or reducing your spending by 10%. 

4. Create a Budget 

Now that you have these goals in mind, you can create a budget that balances your income and expenses. There are a few different budgeting methods and styles, and not all work for everyone. Consider your lifestyle, spending habits, and income, and choose the best method for you. 

Some common budgeting methods include:

50/30/20 Budget 

This is one of the most common budgeting methods and is easy to set up for beginners. This budget splits your monthly income into three categories:

• 50% towards needs (i.e. rent or mortgage and non-negotiables like recurring bills & groceries)

• 30% towards wants (i.e. entertainment, dining out, subscriptions, travel)

• 20% towards savings or debt repayments (i.e. paying off credit card debt or loans or putting it into an emergency fund)

You can change these numbers based on your circumstances. For example, if you live in an expensive city, you might change the needs amount to 60%. If you’re trying to save for a mortgage, you might want to save 30% each month. 

Zero-Based Budgeting

This is best for those with a fixed monthly income and may not be best for beginners. In this method, your expenses equal your income. Every dollar you earn has a specific purpose, and you must account for it. 

Here’s a personal budget example of a monthly income of $3,000. List all expenses and assign every dollar a job: 

• Rent: $1,200

• Groceries: $400

• Utilities (electricity, internet, etc): $200

• Transportation: $150

• Debt repayment: $300

• Savings: $400

• Entertainment: $200

• Misc costs: $150

All of that adds up to $3,000. If you spend too much in a certain category (like $50 extra on entertainment), you should take it from another category, like misc costs.  

YNAB and EveryDollar are two great apps for this kind of budget. 

Pay Yourself First Budget 

If you know you can cover your expenses and don’t want to deal with detailed recordkeeping, the pay yourself first budget can be a good idea. 

Every month, before you pay rent, bills, or anything else, put a pre-determined amount into your savings account. Then, pay all your bills and expenses. Whatever’s left over can be used for your wants. 

Let’s say your monthly income is $3,000, and you want to put 20% of your income into savings. You would either split the $700 into different savings accounts or put it all in one. 

You would spend the remaining $2,300 on rent, bills, groceries, and anything else. This budget ensures your financial goals are the top priority. 

5. Review and Adjust 

After a month or two, review and adjust your budget as needed. You may want to put more money towards groceries if you find yourself spending more in that category, or you may want to put more money into a savings account rather than spending it on entertainment. 

If you spend too much in one category, find ways to cut back in others. Your circumstances may change (i.e., your rent may increase, or you might earn more), so update your budget to reflect it. 

Some Bonus Budgeting Tips to Start the Year Off Strong

No matter what your budget might look like, here are some bonus tips to help you start the new year off strong:

Use a Rewards Credit Card

A rewards credit card can help you stretch your budget by earning cashback or points on purchases you’re already making. 

For example, if groceries, dining out, or recurring bills make up a large portion of your monthly expenses, using a card like the Scotia Momentum Visa Infinite (up to 4% cashback) or the American Express Platinum Card (up to 2x points plus travel benefits) can add value to your spending.

When you create a budget, categorize these rewards as part of your financial strategy—think of them as a way to offset costs or save for specific goals. The cashback you earn could be put in your savings account, and travel points could reduce the cost of future vacations.

To make this worthwhile, ensure you can afford the annual fee and pay off your balance in full every month. By managing your credit card responsibly, you can avoid interest charges and maximize savings.

Pay Your Rent and Bills with a Credit Card

Paying rent and bills with a rewards credit card is a game-changer for your budget, especially with Chexy. Normally, landlords and some service providers don’t accept credit cards, or they charge high fees. 

With Chexy, you can bypass this and pay rent or bills like childcare, car payments, and loans using your credit card.

This can help you:

1. Earn rewards on these typically non-rewardable expenses.

2. Free up cash flow by consolidating major expenses into one billing cycle.

3. Simplify your budget, as everything is managed through your credit card.

By strategically timing your credit card payments, you can align your spending with your income cycle, making it easier to stick to your budget. For example, cashback earned on rent could go toward reducing your debt or add to your savings.

Now that you’re ready to take on the year with your new budget and financial plan, start earning rewards on your rent and bill payments with Chexy. Get started today. 

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