Personal Monthly Budget
It is not easy to stay on a budget. Many people want to be on a budget but don't know where to start. If you know your exact monthly income, monthly bills and the cost of your necessities, you can create a monthly budget that is easy to live by. You will also save money.
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Income
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Multiply your weekly take-home pay by 4.28. If you are paid bi-weekly, multiply your take-home pay by 2.14. For example, if you take home $1,000 per week, your monthly income is $4,280. If you receive child support payments, if you are a landlord who leases properties or if you earn any other monthly income, add this income to your monthly income amount. For example, if you lease a property and earn $720 per month from that property, add $720 onto your monthly income. Your monthly income amount is now $5,000.
Recurring Bills
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Your recurring bills include your rent or mortgage, any property taxes, homeowner's insurance, utility bills, cable and Internet bills, phone bills, car payment, car insurance, child care payments, tuition, subscriptions and any other monthly bills. For example, If your mortgage is $1,000, property taxes are $150, homeowner's insurance is $100, electricity is $100, water is $100, cable and Internet is $75, cell phone is $75, car payment is $250, car insurance is $100 and subscriptions are $50, then your total monthly bills are $2,000.
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Bills for Debt
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Your debt includes any credit card payments, medical bills, student loan payments or any other debt you may have. Place these bills into their own category because you have some choice as to how quickly you pay many of them off. Also, these bills are not for current services. For low-interest items, such as a student loan, pay the minimum amount. For high-interest items, such as credit cards, pay as much as you can afford.
Debt-to-Income Ratio
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Keep in mind that you do not want a high debt-to-income ratio. Jamaine Burrell, in his book "How to Repair Your Credit Score Now," says that your debt should not add up to more than 36 percent of your income. This kind of debt includes your mortgage, property taxes, homeowner's insurance and car payment. In our example, since you have a $1,000 monthly mortgage, $150 in property taxes, $100 in homeowner's insurance and a $250 car payment, your debt before credit cards or loans is $1,500. Since your income is $5,000, the debt should be no more than 36 percent of $5,000, or $1,800. Let's say you have a $600 credit card balance and a $200-per month student loan payment. You should pay $100 per month on your credit card. This way, your monthly debt adds up to $1,800 and you are staying at a 36 percent debt-to-income ratio.
Necessities
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We have determined that you have a monthly income of $5,000, monthly bills of $2,000 a $200 student loan payment and $100 credit card payment. You have $2,700 left for necessities, spending and savings. Gas, groceries, car repairs, clothing and medical costs are necessities, but you can control how much you spend on some of them. For one person, a monthly grocery bill should be no more than $400. You should add $150 for each additional person in your household. Since we are assuming you are a single person, your monthly grocery bill should be only $400. Allot yourself $750 per month for your other necessities. Now, after $1,150 in necessities, you should have about $1,550 left for spending and savings.
Spending and Saving
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In our example, it is reasonable for you to spend $775 per month and save $775 per month. If you save $775 per month, you have money for unforeseen events, such as a major repair in your home or an illness. If no event occurs, the savings are there as a safety net. How you feel about a monthly spending allowance of $775 depends on your frugality and lifestyle. Adjust your spending and saving limits as you see fit.
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