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How to put together your monthly budget

Budgeting image with calculator and pen

How to put together your monthly budget

The first step to learning how to allocate your earnings each month and work on paying off all your debt is to know where you are starting.  Make sure and save every single receipt you get during a given month, so remember to ask the cashier if they do not automatically provide you a receipt to give you one.  It is very important that you do not overlook even the smallest expenses.

Once you have all of your expenses, sit down at your desk, dining room table, or where it is comfortable to spread out all your papers and work.  The first time can take a while to get organized.

What you will need:

  1. All your expenses for the month (grocery store, gas station, starbucks coffee, lunch, pack of gum, gym membership, kids activities, etc…)
  2. Get all of your bills (insurance, electric, water, sewer, taxes, rent, mortgage, cable, internet)
  3. Get your pay-check (all your income)
  4. Piece of paper or a spreadsheet program
  5. Calculator
  6. Pencil or pen
  7. Your spouse if you are married.  You should do this together.

At first spread all your expenses out and try to get a good feel for what the expenses represent.  What you want to do is to create categories of expenses.

Example of some of the categories would be:

  • Utilities
  • Gas
  • Out to Eat
  • Entertainment
  • Food
  • Mortgage
  • Insurance
  • Retirement
  • Credit Cards
  • Car Payments/Maintenance
  • Child Support
  • College
  • Kids Activities
  • Miscellaneous

You may have more, but that is a good basic list to begin with if you are looking for ideas.  Now it is time to place the different expenses into the various buckets.  There is no cut and dry answer to how to budget each individual item.  You will have some items where you have a difficult time deciding what buckets to place the expense into.

Once you have placed all your expense into the buckets, that is when you add them all up.  Now you have your monthly budget.  What we hope at this point is that you notice you have a positive gap between what you are earning and what is being paid out each month.  If you have annual expenses, break these out by dividing them by 12 to get your monthly expense for those items.

We will do another article on how to work through what you “need” and what you “want” to find ways to cut the budget in another article.

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