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How To Budget Monthly Income – You finally got to work. You’ve managed to track your spending and stick to your budget. So what now?
What do you do with your budget after the month is over and you’re ready to start a new month? Most people don’t realize it, but your expenses throughout the month provide you with incredibly useful information.
How To Budget Monthly Income
One of the first steps to creating and sticking to a realistic budget is tracking your expenses. Your expenses are the foundation for creating a budget and ensuring the success of your budgets in the future.
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If you don’t know where your money is going, you won’t be able to make the best decisions about your dollars. Today I’m going to show you how to get all the important information from your expense trackers with three helpful worksheets.
One of the first things I do before starting a new month is figure out my starting balance.
If you track your expenses like I do, you track your expenses from the first to the last day of the month. If you track your expenses based on when you get paid, the first day of your budget month will be your payday.
For example, let’s say you get paid on the 20th of every month. You can track your spending from the 20th to the 20th of the following month.
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You need to decide which period you want to track. Some people find it easier to do this based on when they get paid, and some like to track their expenses each month.
For example, in this article we will assume that you track your expenses from the first to the last day of the month.
Your starting balance for the NEW month will consist of what you have in your cash and checking account on the first of the month.
For example, if I were recording my opening balance for December, I would record on my spending tracker how much money I have in my checking account and in my cash envelopes on December 1st.
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In an ideal world, if you use a zero budget, you’ll have zero as your starting balance each month. That’s because with a zero budget, every dollar of revenue includes work somewhere in your budget. This means he has a spending plan.
But what if you want a permanent cushion or buffer in your checking account to help with overdraft fees or larger-than-expected bills?
Let’s be honest, having your checking account go to zero every month is scary. As for me, I like to keep $500-$1,000 in my checking account at all times in case I have an unexpected bill or need to use my checking account to make an online purchase.
Your opening balance is considered “income” because these funds are used as income for your budget in the new month.
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For example, let’s say you get paid on November 25th. This salary will be used to pay the rent on December 1st. Since you’re tracking your expenses from November 1st to the last day of November, you’ll need to carry this residual income into December as an opening balance so you can use it to pay your rent on December 1st.
I mark the money I carry over to the new month as “opening balance” on my spending trackers, but some mark it as “opening balance”. You decide what to call it.
The first step to budgeting is to categorize your expenses. For myself, I use the highlighter method. It’s a great visual way to organize your spending into categories based on your real-life spending.
I also track my expenses manually. I use the old fashioned pen and paper method. My expense tracker is vital to the success of my budget and it allows me to know where every dollar is going.
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Once your expenses are classified or categorized, you need to add “like” transactions from your expense trackers. For example, if I highlighted all of my grocery transactions in blue, I would add all of the blue transactions together and put the total at the top of my expense trackers.
By analyzing expense trackers in this way, you develop categories for your budget based on your actual expenses. Once you’ve grouped all of your expenses into categories, you can now set realistic limits for your budget categories.
I use a monthly budget breakdown worksheet to categorize my spending and see where my money went in a given month.
It’s important to know your expenses, but also to know your income. To determine your total monthly income, you need to use the formula: starting balance + incoming monthly income. You would use what you had in your checking account and cash envelopes on the first day of your reporting period, plus any income you earned during that period.
Monthly Budget Monthly Income And Expense Recorder Monthly
You can identify your budget categories by looking at your expense trackers. Write these categories on the sheet. Next, I want to assign a monthly budget for each of my categories.
I count on a paycheck, so my budget is based on when I get paid and my limits for each category. But it’s also important to set a monthly budget for each category as you analyze your expenses for the month.
If you’re just starting out and don’t know what monthly budget to use for each category, look at your expenses. Determine these monthly limits based on where your money goes. You can change, decrease, or increase these category budgets, but for now, it’s about creating a budget based on what’s happening in your real life.
In the Budget Categorization section, you can record how much you actually spent during the month and compare it to your budget limits. This will allow you to see if you went over or under budget for the month. You can also determine what percentage of your budget was spent on each category.
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A great benefit of the monthly budget breakdown worksheet is that it also allows you to see if your budget resets each month. With a zero budget, your income minus expenses should be zero. This is a real indicator that every dollar of your income has a plan to spend or has a purpose in your budget.
Your starting balance for the new month should be included in your expenses on this sheet. If not, your income and expenses will not be reduced to zero.
Getting zero when you subtract your expenses from your income means you’ve been tracking your expenses correctly with expense trackers.
If you’re working with debt or savings goals, this worksheet is a must. It’s important to know how much you’re spending on debt and savings each month, but it’s even more important to know WHAT debt and WHAT savings you’re spending your hard-earned dollars on.
Monthly Budget Template Budget Planner Monthly Budget
Are your spending in these categories in line with your goals? Have you ever heard the saying, “Don’t tell me where your priorities are. Show me where you spend your money and I’ll tell you what it is.”
For the worksheet, you need to enter your total monthly income, which you calculated on the Monthly Budget Category Breakdown worksheet, and the total amount you spent on debt and savings. You can then determine what percentage of your income went to both.
Next, you need to specify your specific debt categories. For example, maybe your debt includes credit cards, student loans, and a car loan. Look at your expenses and see how much debt you’ve paid off.
The same goes for savings. Knowing how much went into savings is important, but what specific savings goals did you spend money on?
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Why is this important? Comparing your spending as you go lets you see whether you spent more or less in budget categories from month to month. You can identify problem spending areas in your budget and determine whether you need to increase or decrease your budget limits in the future.
The truth is that there is NO perfect budget. Your budget needs to be constantly adjusted and improved. This is what makes it successful and realistic. A budget is not a set-it-and-forget-it tool. Your life is constantly changing, so your budget should reflect these changes.
To determine the ending balance at the end of the month, you need to use the following formula:
Beginning balance (what you have in your bank account and cash envelopes at the beginning of the budget period) + Total income (how much money comes in during the month) – Total expenses (how much money you have left at the end of the budget period) .
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One way to check if you’ve closed your budget correctly is to make sure that
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