When you estimate living expenses, you should include the cost of your basic necessities, such as food and shelter, as well as the cost of utilities, such as electricity and gas for heat and hot water. Estimating living expenses is necessary to help you develop a budget and it helps you determine the minimum amount of income you need to bring in every month.
Things You'll Need
- Six months of utility bills
- Six months of medical bills
Gather your utility bills for a six-month period. Utility bills tend to fluctuate from cold to warm months. Having six months worth of bills ensures that you are including those cost fluctuations when estimating your living expenses.
Get an average. Averaging the cost of your utilities helps to ensure you are not overestimating or underestimating your utility expenses. Add the cost of each utility bill from the six months of bills you gathered in Step 1. Divide that number by six to get your total monthly average utility expense.
Add in your house payment. You need to add your house payment or rent into the average amount you pay in utilities to get the total amount you pay every month toward your basic living expenses.
Estimate your monthly grocery bill. Food is obviously a necessary living expense. Since the amount you spend on groceries every week fluctuates, it's okay to estimate this cost. Once you figure out how much you spend weekly, multiply that number by four and add it to the figure you calculated in Step 3.
Add in necessary medical expenses. If you have monthly medical expense, such as prescription drugs that you must have to stay healthy, you need to include these costs in your estimated living expenses.
Tips & Warnings
- Always include any necessary extra costs associated with your home. These necessary costs include items such as home owners association (HOA) fees and homeowner's or renter's insurance.
- Never include your debts in your estimated living expenses. Debts, such as credit card payments are not necessary for your health or well-being, so you should not include them in your living expenses.
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