Most people know that they should have a budget, but figuring out how to make one can seem complicated. How do you decide how much of your income goes to groceries versus entertainment? And how do you account for bills that change monthly, like your electric bill? Many people find that it helps them to have a visual representation of where their money goes. Making a pie graph can help you create a budget, stick to it and visualize your monthly expenses.
Understanding Pie Graphs
A pie graph or pie chart uses data to break down a whole into different parts that are each represented by a slice within a circle. When it comes to budgets, each slice of the pie graph represents a different category of expense. Pie graph budgets are especially helpful for people who like to have a visual representation of their budget each month because it shows you an overall picture of your spending and can help you determine if you're paying too much in one category over another.
Reviewing Income and Expenses
Pie graphs use your financial data to create their picture. This data comes from your bills and monthly spending. In order to create an accurate pie chart, you need to know how much money you're spending each month. This data is gathered through collecting all monthly expenses. Using that data allows you to create a chart with accurate slices for each expense category. The total, or the part of your budget that the full circle represents, is your total monthly income. This way, you can tell at a glance how much total money you have to spend and each category in which you're spending it.
Graphing a Budget
In order to determine how big each slice of the pie chart must be, pie graphs use percentages. For example, if the total amount of a manager's monthly income is $6,000 and she spends $300 on groceries each month, the graph would have a slice representing 5 percent of the total circle because $300 is 5 percent of $6,000. Each expense is calculated this way until you have 100 percent of your monthly expenditures.
When it comes to creating the graph visual, however, people differ in their preferences. Some people like to graph their budget by hand using a compass and protractor. A compass helps make a perfect circle, and the protractor lets you divide your circle into accurate slices for each budget category. However, most people prefer to use a computer program, like Excel, where you can enter each expense category into a spreadsheet cell, and the program will automatically create a color-coded pie graph showing your monthly budget.
Bea is a personal finance and legal writer based in Texas.