Making a Budget in 6 Easy Steps

Whether you're looking to save for your dream home or are curious about your monthly spending habits, budgets can help you understand and take control of your finances.

5 min read

April is Financial Literacy Month, and we’re here to help you understand and better manage your money. Financial literacy is about taking steps to reach your financial goals, and there’s no better first step than making a budget. Whether you're looking to save for your dream vacation or are simply curious about the health of your monthly spending habits, budgets can help you decipher your financial health, keep your spending under control, or better understand how much money you actually have. 

A budget compares your income against monthly expenses, giving you a better understanding  of your finances. Budgets allow you to visualize spending patterns and give you the power to improve or correct any unwanted behavior. Viewing your monthly budget as a tool to help you reach your financial goals will enable you to plan for the future and make the most of every dollar in your account. Here we walk through 6 steps to help you make a budget.

Understand your monthly income

While figuring out your monthly income could be relatively straightforward, having a range of gigs and side-hustles to supplement your paycheck has become more and more normal these days. Be sure to add all of the areas of your income, but being realistic will help you in the long-run. Factor any guaranteed income you are going to take in each month, plus any extra checks coming your way that you know you can count on. If your income is in the form of a traditional paycheck, be sure to subtract taxes, benefits and other deductions from your check before factoring it in. If your income is not in the form of a traditional paycheck, make sure to deduct any anticipated taxes or payments before adding it to your monthly income (and set that money aside in a separate account).

Reach your goals with Spaces

Use N26 Spaces to put money aside for the things that matter to you.
Discover Spaces
Different N26 spaces to save money.

Calculate your expenses

Calculating your monthly expenses might seem intimidating, but it doesn’t have to be. Have all of your statements handy, and add up all the things you pay for on a regular basis. This includes rent, electricity, subscriptions, water bills, groceries, and more. Remember to include any monthly savings goals, or other recurring spends. Add up all of your expenses to get the total number of what you spend each month. 

Categorize expenses as “fixed” and “flexible” 

This is where you will need to decide which expenses are essential and which are more fluid. Here are some examples of essential expenses:

  • Rent

  • Utilities

  • Internet or cable

  • Groceries

  • Car payments

  • Loan payments

No two people’s fixed expenses look the same, but writing them down is a good place to start. Take a look at a few months and write down any recurring expenses you may have. If you have a monthly payment that happens on the same day every month, you might also want to set up an alert. This is a great way to keep track of when your essential expenses happen each month.

Then there are flexible monthly expenses. These expenses change month-to-month and include:

  • Eating out

  • Shopping

  • Social activities

  • Donations

Think of this as the money that is available to you after subtracting your fixed expenses from your income. Depending on your situation, you might want to set aside some money for savings, to build up an emergency fund, before factoring in the money you have available for flexible expenses. 

Subtract expenses from your income

For some this might be one of the scariest steps in the process, but remember, creating a budget is a great step to help you understand and take control of your finances. Are you spending more than you make? That’s okay, it’s happened to most of us. Subtract all of your expenses from your income and see what’s left. With this simple math problem, you’ll see if you spend too much each month or even too little. 

Dig deeper

Now that you have an idea of how much you make and spend each month, take a second look over your budget and try to understand your particular situation. 

  • Are there any flexible monthly expenses you can or would like to cut out? 

  • Are there any changes that you’d like to make to give yourself more breathing room? 

  • How much money are you spending for any given category?

  • Is there more money you could put into savings or an emergency fund?

Take a look at the numbers and decide how you want to spend your money. How specific or broad about setting parameters for your spending is entirely up to you and your unique situation.

Check your budget regularly, and adjust as needed

Monitoring your budget is a great way to stay on top of your finances, and understand if there is anything you missed or isn’t working as you hoped. Make sure you’re not going over your spending goals, and adjust it as needed to get the most out of your money. Use check-ins as a way to track new or existing spending patterns, and avoid any unpleasant surprises before they happen. 


How can N26 help me make smart financial decisions?

No matter what your level of financial literacy is right now, you can learn the skills that you need to manage your money better. Our accounts are designed to help you make good financial decisions, and give you a clear understanding of your money. Stay in control of your budget with N26’s automatic spending statistics, a simple visual breakdown that shows you exactly where your money is going every month, or use Spaces to put money aside for the things that matter most to you.

Are you ready to take your financial literacy to the next level? Sign up for an N26 account today, and get mobile banking that supports you in your financial journey.

The N26 account is offered by Axos Bank®, Member FDIC. N26 Inc. is a service provider of Axos Bank. All deposit accounts of the same ownership and/or vesting held at Axos Bank are combined and insured under the same FDIC Certificate 35546. All deposit accounts through Axos Bank brands are not separately insured by the FDIC from other deposit accounts held with the same ownership and/or vesting at Axos Bank. The N26 Visa® Debit Card is issued by Axos Bank pursuant to a license by Visa U.S.A. Inc. The N26 Visa Debit Card may be used everywhere Visa debit cards are accepted.

By N26

Mobile banking the world loves

Related posts

Maybe some of these will interest you