Budgeting is a crucial aspect of personal money management. It allows you to see where your money is going each month and make adjustments so you are meeting your personal financial goals like paying off debt, investing and saving. There are a number of items to include in your monthly budget.
The first thing to include on your monthly budget is your net monthly income, or the amount of money you make each month after taxes and other deductions. Look at the past few paychecks to see exactly how much you take home each month. Include all income sources, like a second job or payments for child support you receive. Your expenses and other budget items should equal this number. If the total is more than your take home pay total, then you are overspending; if the total is far less, then you have some more money to allocate to savings, investments or other expenses.
Most of your budgeting items consist of your monthly expenses. Some expenses are fixed, such as house and car payments, while others vary month to month, like electric bills. List all expenses on your budget sheet, including your house or rent payment, homeowners insurance, homeowners association fees and other home maintenance costs. Next, list your auto expenses, like car payments, gas and insurance, then list your food expenses, like groceries or dining out. List any additional taxes you pay that are not deducted from your paycheck, as well as utility expenses, like average electric, gas, cable, phone and Internet service costs. Also, include all debt payments, like credit cards or loans, as well as child care expenses, school tuition and donations. Finally, include a category for entertainment, pocket money or vacations to make sure some of your money goes toward having fun.
Savings and Investments
Savings is another important aspect of a budget. Some people list savings items before expenses to make sure that they do put money away into savings each month. You can create a few different savings categories, like kid's college savings, retirement savings and emergency savings. Save as much as you can, but start with 5 percent to 10 percent of your monthly income in each savings category. If you have a budget surplus, you can allocate the leftover money into savings. Also, include a category for investments. Take an investing class or consult a financial adviser for investment advice.
Review your budget items and compare them to your recent bank statements to make sure all expenses are accounted for. If you missed any, like medical expenses, include those as well. Once you are sure that all items are accounted for, add up all expenses, savings and investment amounts. They should equal your total take-home pay. If they are higher, you need to either make additional money each month or reduce some of your expenses. For example, you can switch to less pricey phone or cable plans, or cut those services altogether. If you still have money leftover, allocate that money toward paying off debt faster or saving or investing more.
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