Personal Monthly BudgetThe first thing you need to do is write down every penny that you spend and what you spend it on. Try to do this for no less than a week, a month would be better. By doing this you will start gathering the information for your personal monthly budget as well as start to see where you may be spending money on unnecessary items. The next thing that you need to do is gather information on how much you spend throughout each year. Many expenses do not occur monthly and you don’t want to forget to budget for them. Make sure that you include every expense that you will incur throughout the year. Some of these will include; groceries, spending, car maintenance, gasoline, charitable donations, house payment, car payments, utilities, taxes, insurance, Christmas gifts, birthday gifts, home repairs, clothing, savings, retirement savings, vacation, credit card debt, children’s activities, pets, eating out, vehicle license, medical costs, child care, hair care, school supplies, entertainment, college savings, etc. I’m sure you will have additional expenses in your personal monthly budget that I haven't included here. After you know everything that you spend money on in a year, write them all down on a per month basis. For those that you pay once or twice a year just average them out to see what they cost you per month. For example if you pay $1,200 each year for house insurance, divide $1,200 by 12. This gives you an average of $100 per month for house insurance. Total your monthly expenses and compare that to your monthly take home pay. Obviously if your expenses are more than your take home pay, you have to make some adjustments. No two personal monthly budgets will look exactly alike. If you are having a hard time making it from month to month, and you may even be concerned about whether or not there will be enough money at the end of this month, you need to start your budget differently than someone who just wants to get their finances under control. It has been my experience that when you write everything down in this manner many people find that they do not make enough to cover their expenses. Let’s start with those who did not have enough take home pay to cover expenses. Write down all of your expenses in a prioritized order. At the top of the list put those items that are necessities. In general the items at the top of the list should be the following. Groceries These items will keep you fed, a roof over your head, the lights, heat and water on, and allow you to get to work. The items at the bottom of the list would be. Vacation These items are not necessities they are luxuries, especially for someone that is worried about paying the bills at the end of the month. Fill in the middle of your list with the remainder of the items. Put a lot of thought into prioritizing your list. Do not confuse wants with needs. Remember, the top items of the list are the needs and the bottom items are wants. Now that you have your expenses prioritized you need to use your money to take care of the items starting from the top of the list and working your way down as you get paid. Of course, since you did not have enough to cover all of your expenses you will have to cut some of the items out and try to reduce others. Remember to cut the items from the bottom of the list. No cheating is allowed. Ideally you will want to put aside money monthly for those items that are not paid monthly. Essentially you are making a savings account for the non-monthly items. This is a great method of taking the stress out of those big items like homeowners and vehicle insurance. When the bill comes, you have the money set aside to pay it and do not have to wonder where you will get it. The only time that you should not do this is if you are not able to pay all of your bills currently on hand. Bills that you have already received get priority over bills that will be coming in the future. Just don’t forget about those future bills, they will come, bills never get lost in the mail. Even for those that have enough to cover their expenses it is usually still an eye opener. Take this opportunity to increase savings categories, get rid of vehicle payments and reduce expenses where possible. It is still a good idea for these people to prioritize their expenses as well. If for some reason their income should reduce they would already have a prioritized personal monthly budget in place. Click here to get a free budget form. It is in an Excel spreadsheet. We use this same form for our personal monthly budget.
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