Figuring out a home budget is a process of seeing how much money you've been spending on specific bills and purchases, then adjusting the amounts you'd prefer to spend for each. Many personal budgeting and checkbook software applications are designed to show you where you've been spending your money. The problem is that you see these expenditures after the money is already gone. Figuring out your own home budget allows you to create a spending plan, where you decide where you want the money to be spent before you even receive it. This approach lets you control how much money goes into various bills or purchases, and can help you put money aside for something special.
Items you will need
- Current paycheck stubs
- Current bills
- Current credit card statements
- Checkbook ledger or bank statement
Make a list of all recurring household bills, such as rent, utility bills and insurance payments. List each bill separately, and list the average monthly amount of the bill next to its name.
Make a list of all other things you spend money on regularly. These expenditures usually include dining out, movie rentals, groceries, and gas for the car. Next to each item, write down the amount of money you think you spend on each one, every month.
Add together all the dollar amounts of items you spend money on -- regular bills and general purchases -- and write this down as your total monthly expenditures amount.
Add together the amounts of your take-home paychecks to determine the amount of income you receive each month. If you receive other regular income besides paychecks, add that and write down the total as your monthly income.
Subtract the expenditure total from the income total. If there is more income than expenditures, the remaining amount is a surplus that you can work into your budget. If the expenses are more than your income, you'll need to trim spending in your budget.
Re-write your list of bills and purchases to create a shorter list of broader spending categories. List items such as dining out and movies, for example, can be combined into a general entertainment category. Combine items into broader categories that make sense to you, and combine the spending totals for each to create an overall category dollar total.
Adjust any category names as desired, then adjust the total dollar amounts if needed. If you need to trim a bit of spending from your budget for example, you could subtract $10 from the entertainment category, and $10 from the clothing category, to reduce the overall budget by $20. If you have a surplus of money left, you can add amounts to one or more categories or create additional categories to budget money for. You can start saving for a vacation, for example, or put something aside for a rainy day.
- Dave Ramsey: Do Your Dollars Have Names?
- "The Total Money Makeover: A Proven Plan for Financial Fitness"; Dave Ramsey; 2007
- The Digirati Life: How To Make A Budget In 10 Easy Steps
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