Making a monthly budget can be difficult if you’ve never done it before. It’s quite common for people not to know what they spend without a budget – and yet the challenge of creating one stops some people from even trying.
At Addition Financial, we understand that budgeting may not be something our members are comfortable doing. That’s why we’ve created a personal monthly expenses calculator and planner, to help you manage your money effectively and reach your savings goals.
Keep reading to learn how our calculator works and get some pointers about what your completed budget should look like.
Information to Create a Monthly Budget
Let’s start with the information you’ll need to use our monthly expenses calculator and planner. It’s important to use the most accurate and up-to-date information possible. You’ll need to enter your monthly income, including:
- Your net monthly pay (that means after taxes)
- Pay from other sources (including spousal and child support)
If your other income sources are sporadic, you shouldn’t include them in your monthly income. The income you include should be income you can rely upon every month.
After you’ve entered your income, you’ll need to break down your expenses by category, as follows:
- Housing expenses, including your rent or mortgage payment, 2nd mortgage, home or renter’s insurance, homeowner’s or condo association fees and property taxes.
- Utility expenses, including electricity, gas, water, sewer, phone (landline & cell phones), cable, internet, trash and recycling.
- Transportation expenses, including car payment(s), auto insurance, gas, parking and maintenance.
- Food and grocery expenses, including family groceries, household items, school lunches and meals out.
- Health expenses, including health insurance premiums, copays, prescription drugs and life insurance premiums.
- Personal items and maintenance, including clothing, makeup, personal hygiene products, barber/beauty shop visits, laundry and dry cleaning.
- Kid-related expenses, including child care, child support, tuition and school supplies.
- Debt and loan payments, including credit cards, store cards, medical debt, student loans, tax payments and any miscellaneous debt.
- Miscellaneous expenses, including travel, holiday & birthday gifts, veterinary care, pet food & supplies, hobbies, sports, entertainment and charitable donations.
The calculator will tabulate your total income and subtract your total expenses from it. The goal is to have enough to pay your expenses with some left over to put into savings for your future goals. Click here to access the calculator.
How Much Should You Budget?
Every family is unique, but there are some basic guidelines you can use to determine whether you’re making the best use of your income.
Let’s start with the biggest expense, which is housing and costs related to it. Whether you own a home or condo or rent an apartment, the chances are good that you pay a significant percentage of your monthly income to live where you do.
There are a few methods you can use to calculate how much you should be spending on housing. One is to keep your rent or mortgage to 30% or less of your gross pay. In other words, if you were earning $5,000 per month before taxes, you shouldn’t be paying more than $1,500 for your rent or mortgage.
Another strategy is the 50/30/20 method, which breaks down spending like this:
- 50% of your net pay is for housing and necessary things, such as utilities, groceries and insurance premiums.
- 30% of your net pay is for things you want but do not need, such as entertainment, travel, hobbies and other items.
- 20% of your net pay should be used to pay down existing debt or invest for the future.
You can choose the method that works best for you. What’s useful about looking at your income in this way is that it can help you spot areas where you might be able to save money.
How to Trim Your Budget
Let’s finish up with a few tips for how to trim your budget if you find that you’re spending more than you can afford.
Because housing represents the biggest expense, you may want to start by looking at ways to save money. Some suggestions might include:
- Refinancing your mortgage to get a more favorable interest rate
- Selling your home and moving to a smaller space
- Looking for a new apartment with lower rent
- Talking to your insurance company about bundling coverage to save money
What if you don’t feel that moving or refinancing is right for you? Here are some other suggestions to help you trim your expenses.
- Call the cable company and choose a less expensive package or get rid of cable entirely and choose less-expensive options, like Netflix, Hulu or Amazon Prime. You can get all three for a fraction of what the average family pays for cable.
- Call your cell phone provider and choose a more affordable data plan.
- Download a coupon app onto your phone and use it to save money on groceries.
- Buy some items that are used instead of buying them new.
There are lots of ways to save money. The best way to start is by looking at your current expenses and then doing what you can to reduce them.
Monthly budgeting is an important part of responsible financial management. You can try our personal monthly budget expenses calculator here. Or, you can learn more about how our checking accounts can help you manage your money by clicking here.