Problem #2: It doesn’t account for geography.Problem #1: It uses percentages of income.Benefit #3: It lets you treat yourself.Benefit #2: It keeps your home and transportation expenses in check.Benefit #1: It’s a solid starting point.
Read more helpful financial information and articles on the Spirit Financial Blog. Whatever works for you and keeps you on track in ensuring your monthly spending does not exceed your income is what you should use. There’s nothing wrong with tracking on your own through excel or even using good ole fashioned pen and paper. Tracking through a budgeting app, such as Mint, PocketGuard, or YNAB, might make it easier and more efficient to monitor your saving and spending. Careful monitoring of your budget will mean the difference between success and failure. Once you’ve created your budget you need to track your spending each month to be sure you are sticking to it. Miscellaneous – 5-10% Budgeting can help you avoid debt and achieve goals For instance, if your mortgage and insurance costs are on the higher end of the range, you’ll have to adjust other areas, such as entertainment, personal spending, and giving down. It may give you a place to start when creating a budget and a better idea if you are overspending in certain areas. It is a range, so keep in mind you can’t be on the higher end of the range in all categories or you will be over budget. Once you’ve tracked your spending in all of these categories, there’s a general rule of thumb regarding how much you should be spending in certain areas. Miscellaneous – Any other monthly expenses, such as childcare or babysitter, pet care, organizational memberships, gifts.Insurance – Health insurance, car insurance, homeowners insurance, renters insurance, life insurance, etc.Healthcare – Copays, medications, doctors/dental visits.Entertainment – Activities, gym memberships, hobbies, vacations, subscriptions, etc.
Your fixed expenses will include your recurring monthly bills, including mortgage or rent, phone and utilities, insurance, car payment, savings/retirement, childcare, tuition, and gym memberships for example. With a little research through your statements, you may be surprised to see just how much you’re spending. Don’t record what you think you should be spending on items such as groceries, but what you actually are. When calculating expenses, put them into categories. When determining income, use the amount you bring home after taxes and after any other deductions, such as child support, are taken out. A realistic budget starts with determining your monthly income and then calculating all of your monthly expenses.