How to budget: calculate monthly income and expenses

Making a budget is the most important step I can take to make a clear view of my financial status. What exactly is budgeting? It is the details of spending you intend to make. It estimates how much money will come in during the months ahead and it allocates enough money to cover expenditures such as housing, insurance, and food. A good budget also includes our regular savings.

I used to have my ledger to record my income and expenditures. I stopped it due to the lack of encouragement from my family and friends who rely on guesswork or wish list of things they’d like to buy without having a long-term financial plan. Before long, my expenses easily outstrip my earning leading to a financial meltdown.

I am a teacher. I usually ask my students to make an outline before they began writing the term papers in school. In my opinion, a budget is like that,

A plan for where my money will go before I earn it.

It won’t protect you and me from disasters, but it can help us avoid them. We need to be honest when we get ready to budget.

To start, I go for paperless and open a new spreadsheet on Google Drive (you can choose any platform that convenient to you). You can keep budgets on paper, but there are also lots of apps and software that can help you plan your cash flow more efficiently.

I choose to use the spreadsheet on Google Drive because I can easily share it with my husband, and easy to manage through my phone. When it comes to a budget, forget about pre-tax earnings. I just record the only income that my family can spend or save.

It is difficult to remember all of my monthly expenses. I start by listing out the bills my family pay regularly each month. These will include:

  • mortgage and rent
  • auto expenses
  • student loans
  • mobile data plan subscription

After this, I’ve also listed the other variable expenses including:

  • utility bills (electric & water)
  • gas and tolls
  • groceries and eating out

Now I’ve identified all of my expenses. Here is an overview of my family monthly budget:

budget spreadsheet
my household monthly budget in 2018

Luckily, my household income still exceeds my expenses and there is a little surplus money. However, my budgeted expenditures are about 95% of my family income! That’s mean I still need to cut down 5% of spending to make sure the expenditures are lower than 90%. God Bless Me……

OKAY! Now I know how much money I can deposit into my savings account as a backup, and what I need to do is to control my spending and manage my budget starting from NOW.

By the way, my family will have a new member coming soon at the beginning of August…