Budgeting is one of the most important things we can do to ensure our family's security and our own peace of mind. Two goals should guide you as you set up your personal budget: Your expenses should not exceed your income, and your percentages should align with your values about money.
Things You'll Need
- Paycheck Stubs
- Other Income Records
- Bank Statements
- Credit Card Statements
Determine how much money you have coming in each month. Include money that you have a reasonable expectation of receiving. For example, include a paycheck or a Social Security check but not a birthday gift or a bonus. Calculate based on after-tax income.
Gather up all receipts and bank and credit card statements. Analyze how much you have been spending, and where. Don't worry yet about where your money should be going. Take an honest look at where it is going.
Divide your expenses into categories. The categories should include housing, groceries, transportation, utilities, health, insurance, clothing, savings, recreation and other living expenses.
Divide the total of each category by your net income. For example, if your net income is $2,500 per month, and your utility bills total $185 per month, divide 185 by 2,500. You get 0.074 or just under 7 1/2 percent of your income. Do this for each category to determine your percentage allocations. If you did the math correctly, the percentages should total 100 percent.
Review the recommended percentage allocations of financial professionals and see how they compare to yours. Each family's allocations will vary based on circumstances. If your income is low, fixed costs such as housing may claim a larger percentage of your income. If you have young children, day care may claim a high percentage of your income.
Adjust your percentages as appropriate.