[wpseo_breadcrumb]Do you know where your money goes every month? No matter how much money you have and how much money you earn, it’s a wise financial decision to track your spending and follow a budget. While many people think a budget restricts your spending, the opposite is true – a budget gives you permission to spend in the areas you care about most. Continue on to learn more about creating a monthly budget for personal finance success.How to create a monthly budgetA monthly budget is a spending plan you create to help manage your money. There are many different strategies to create a monthly budget. Everyone has different preferences and needs. Some people like apps to automatically track their budgets, while others prefer a spreadsheet or old school pen and paper.What’s most important is that you choose a method you can stick with and follow over time. Here are steps you can take to create your first monthly budget:1. Understand your incomeMany people fall into a trap of spending more than they earn. To avoid it, start by adding up your income. It’s easiest to budget when you have predictable income each month. Hourly, tipped, and self-employed workers may have different income levels each month. In that case, you should make a conservative estimate for how much you’ll make.2. List out financial prioritiesMake a list of your financial Needs and Wants each month. Common needs include rent or mortgage payments, utilities, cell phone service, groceries, transportation, insurance, and loan payments. Wants include restaurants, shopping, entertainment, and other spending you can live without if you had to. Don’t forget to include a budget for savings and investments as they’re important for your long-term financial health.3. Create budget categoriesNow that you have a list of your financial priorities in front of you, you can build your budget. Start by assigning each category a monthly spending limit. It’s always okay to plan for higher expenses and spend less. Estimating low can bust your budget if you have to spend more on any category, so do your best to make a reasonable estimate of how much you will spend.4. Decide how to track your budgetOnce you have a final budget, it’s time to pick a method for tracking your monthly spending. Some people like to write every transaction down and track things manually while others prefer a hands-off approach where a computer program, website, or app tracks your spending automatically. We’ll look at some of the best budgeting tools below.Best way to stick to a monthly budgetCreating a monthly budget isn’t worth the time and effort if you won’t commit to following it. Every time you go to swipe your card or shop online, it’s a good idea to check your budget to make sure you can afford the expense.Take some time when choosing your budget categories. Some people prefer budgeting with line-item detail for every purchase category. Others prefer higher-level categories. For example, the 50/30/20 budget says you should spend 50% on needs, 30% on wants, and 20% on savings. If that works for you, there’s nothing wrong with tracking fewer categories.Mindset is very important when it comes to budgeting. If you think of your budget as something that tells you where you can and can’t spend, it may not work. Instead, think of your budget as giving you permission to spend in certain areas. As long as you stay within your budget, you are good to go buying a movie ticket or a nice dinner out.Consequences of not having a monthly budgetIf you don’t track your spending and follow a budget, you could make serious financial mistakes and not realize it.With bad money habits, it’s easy to spend more than you earn with credit cards. This can lead to serious debt with big interest costs that can take years to pay off. This is a common situation that a budget can help you avoid.If you’re already dealing with financial strain, a budget can help you avoid overspending. While financial pressures can lead to serious stress, a budget may help you make good decisions and navigate periods of financial difficulty.Best tools for managing your budgetIf you’re ready to start budgeting, you can use any of these tools to stay on track:Mint: Mint is one of the most popular free budgeting tools around. Connect to your bank, credit card, and other financial accounts and Mint will track your budget automatically.YNAB: YNAB, short for You Need a Budget, costs $83.99 per year after a free introductory period. YNAB is best for people who want a hands-on, detailed budgeting experience.Personal Capital: Personal Capital is best for people who want to track their income and expenses at a higher level. It offers free budgeting and investment management tools. Personal Capital also offers a paid investment management service.Spreadsheet: If you’re comfortable using application like Google Sheets or Microsoft Excel, you can manage your budget using a spreadsheet. Be sure to take advantage of the formulas that can make tracking your budget in a spreadsheet even easier.Paper and pen: There’s nothing wrong with budgeting with a paper and a pen. If it helps you stick with a spending goal, it’s a good way to go.Don’t ignore your monthly spendingA budget helps you take ownership of your finances and make good spending decisions. Everyone can benefit from spending some time to better understand their spending.If you’re new to budgeting, you could find areas you’re spending more than you realized. If that’s the case, use your budget as a tool to cut spending on categories you don’t value. Remember, just because someone else thinks something is worth their money doesn’t make it worthwhile for you.There is no better time to start with a budget than right now. Few people would ever regret spending the time to improve their finances. A budget is key to personal financial success.