How To Easily Write A Monthly Budget That Really Works
First grab a pencil and some notebook paper. At the top of the first page title the month and year and just below write down what you expect to be your gross (total before taxes) and net (total after taxes) income for the upcoming month. Now you’ll want to determine your current regular monthly expenses to project them for the next month. Just below your projected income write down the following major categories leaving several lines of space between:
Tithe: 10% or more of income to your church or charity; giving is important.
Food and Necessities: Includes childcare, medical checkups, medicine, etc.
Rent or Mortgage
Utilities: Water, electricity, natural gas, etc.
Gasoline: If you drive an automobile.
Debt Payments: The minimum monthly payments you owe on all debts.
Phone/Internet/Cable
Miscellaneous: Fun, Entertainment, etc.
Savings: This is what you have left over for a rainy day.
Retirement: This may be a private or employer sponsored retirement account.
These are the categories of expenses you will include in your budget shown in order of importance. Below each of these categories you will write down your projected expenses.
You will recognize that some expenses like rent, phone/internet/cable, debt payments, etc. will be constant or nearly consistent from month to month and easy to document in the budget. On the other hand, some bills, like utilities, food and necessities, gasoline, etc. will vary from month to month, in this case look at previous payment receipts, to determine approximate averages for monthly expenditures. In the case of seasonal bills such as utilities you may need to look a year ahead at payment receipts to recall what you spent for that particular month (the electric or propane bill for example will be quite different in July than in January). For expenses like food and necessities you may not be exactly sure what you spent the last month, and if so for a week record how much you spend (be honest as this is an assessment) and multiply that amount by 4 and this will be your projected expense for the month.
Once you have these expenses recorded for each category you can divide out allotments for each from your projected net income (if taxes have not yet been taken out, approximate a percentage to subtract out). Write these amounts in parentheses by the projected expense amount. The amount you have available for that category is the lesser of these two amounts. Remember the categories are listed in order of importance and if there is an income shortage, the first categories take priority. Do the projected amounts equal the allotments, are they less or more. If the allotments are less than you have been overspending, if the allotments are more then you are spending less than you take in which is great.
Once you have your projected and allotted amounts listed, your budget is ready to go and now you just write down the amounts you spend in each category and review them at the end of the month to see how you did. See the example completed budget below.
November 2011
Gross Income (projected): ,000.00
Net Income (projected): ,300.00
Tithe: 0.00 (0.00) – the lesser of these values is the available amount
Spent/given: 0.00
Available: 0.00
Remaining balance: 0.00 – 0.00 = .00, Good
Food and Necessities: 0.00 (450.00) – the lesser of these is the available amount
Spent: 0.00 + .60 + .29 + 3.89 +82.40 = 5.18
Available: 0.00 (the lesser of the projected and allotted amounts)
Remaining: 0.00 – 5.18 = -.18, Not good, we are over budget
Rent or Mortgage: 0.00 (0.00) – the lesser of these values is the available amount
Spent: 0.00
Available: 0.00
Remaining balance: 0.00 – .00 = .00, Good
Utilities: 0.00 (0.00)– the lesser of these values is the available amount
Spent: .67 + 201.56 + .00 = 4.23
Available: 0.00
Remaining balance: 0.00 – 4.23 = +.77, Very good, a budget surplus
Gasoline: 0.00 (0.00) – the lesser of these values is the available amount
Spent: .97 + 39.51 + .00 + .00 + .78 = 2.26
Available: 0.00
Remaining balance: 0.00 – 2.26 = +.74, Very good, another budget surplus
Debt Payments: 0.00 (0.00) – the lesser of these values is the available amount
Spent: 0.00 + 120.00 + .00 = 0.00
Available: 0.00
Remaining balance: 0.00 – 0.00 = .00, Good
Phone/Internet/Cable: 0.00 (0.00) – the lesser of these is the available amount
Spent: 0.00
Available: 0.00
Remaining balance: 0.00 – 0.00 = -.00, Not good, we are over budget here
Miscellaneous: Not enough money left in the budget
Savings: Not enough money left in the budget
Retirement: Not enough money left in the budget
Overall, this budget went over by .67. .67 too much was spent.
So we can see from our example budget that the projected expenses were higher than the income and so money ran out for the later categories. For your own personal budget if you have a situation where projected expenses exceed available amounts, you could have apportioned the budget like this or spread the income over all categories, reducing amounts to first categories to allow some for later categories. A budget like this will show you what your outflow of money is versus the inflow and give you insight into you’re your financial standing.
You can see that with a budget you will know exactly where your money is going and from this you can determine areas where you can cut spending, increase spending, find room to get more money for paying off debt, saving for retirement or any other financial goals you have set. You want to make a new budget like this each month continually improving it as you go along. A budget is something that changes with time just like life. Its something ongoing that you modify and refine as priorities and situations change.
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Written by NCfriend
Engineer, Horticulturalist, Writer
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