Determining your monthly expenses is the most important step in creating a realistic budget. Knowing what your expenses are will allow you to create an accurate budget, rather than guessing and overspending each month. Seeing where your money really goes will also give the you the opportunity to trim your budget if necessary. Track your actual monthly expenses for a few months to see if your budget is accurate and realistic.
Gather your bank statements, checkbook register, credit card statements and cash receipts you have for at least the last month. If you have these items available for longer than a month it will give you a better idea of what your monthly expenses really are. If you only have the last month's worth, start there.
List all your expenses by category in a notebook or spreadsheet. For example, under "housing," you might have rent or mortgage, insurance and utilities. Under "transportation" you'd include car payments, auto insurance, gas, repairs and public transportation costs. Include a section for debt repayments, savings, food, phone, cable and anything else you may pay for on a monthly basis. Finally, list your personal expenses, such as clothes and extras, which might include weekly lattes, bookstore purchases or movie dates.
Add up everything you've spent over the last month and put it in the category it belongs in. If you can track more than a month, you will have a better idea of what to expect in the future.
Track your outgoing expenses every month to readjust your budget as necessary. For example, your utilities might go up and down each month, but tracking a year's worth of bills will give you an average or let you know what months you need to budget more for.
- Stockbyte/Stockbyte/Getty Images