money

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…

pexels-photo-57529.jpeg

10 thoughts on “How to budget: calculate monthly income and expenses”

  1. I think this article will help a lot of people. Have you ever seen the site moneysavingexpert? They recommend adding some yearly considerations into the monthly budgeting. For instance, what happens when Christmas comes? December isn’t a typical month. Therefore, why not divide the money you want to spend at Christmas into twelve and put a little aside each month. (The same goes for any other festival or annual expense for those who don’t celebrate Christmas.)

    Liked by 2 people

    1. I went through the site moneysavingexpert before. I agree that adding the yearly event fund each month is essential for us to budget our money. I seldom spend much during Christmas but a lot during Chinese New Year. Thank you for your great suggestion!

      Liked by 2 people

  2. Great intro to budgeting. I highly recommend using an app or similar with an automatic bank feed to track your expenses it will save you a lot of time and help you find any holes in your pockets! There are many free or low cost options, and many include the an app & the ability to share with your partner. I personally use pocketsmith with automatic bank feeds, you can try pocketsmith for free (with manual bank imports).

    Liked by 2 people

      1. I meant to say congratulations on the newest member! Those little people can be pretty expensive and baby gear is a huge area of over-consumption/over-marketing/keeping up with the jones’ mentality in my opinion. If you want any saving tips let me know! I’ve made many mistakes to learn from here 😉

        Liked by 1 person

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s