April 18, 2019

It's like a reality check for your money.
Take charge of your finances by creating a budget and sticking to it. A budget can help you make sure bills are paid on time, cover unexpected emergencies and reach your current and future financial goals. Start by following these simple steps in conjunction with our home budget calculator to get a clearer picture of your monthly finances (most of the information you need is already at your fingertips).  

Calculate your income

To set a monthly budget, first you need to determine your total income. Make sure to include salaries, interest, pensions and any other income sources, including a spouse’s income if you’re married. Using our home budget calculator, click the “edit” button next to “net monthly pay” and enter a dollar figure next to each relevant income source. Make sure that the figure you write down is the amount you receive from each income source on a monthly basis.

If you get a salary, be sure to use your take-home pay, not your gross pay. Taxes are usually taken out automatically, but if they’re not, remember to include them as another expense. If you receive money from somewhere not listed, enter the source of that money along with the amount under "other income."  

Estimate expenses

It is a good practice to keep track of how much you spend each month. Using our home budget calculator, click the “edit” button next to “monthly expenses” and enter a dollar amount next to each relevant expense. Some of your bills will vary from month to month, so use a monthly average. For example, if your cell phone is $45 one month and $55 the next, estimate $50 per month. For annual bills, divide the yearly cost by 12 for a monthly figure.  

Figure the difference

Once you’ve entered your monthly income and monthly expenses and hit “apply,” the calculator will show you the difference by stating what is left available for savings.  

Things to note:

  • As you review your expenses, note that rent or mortgage payments plus your credit obligations should not exceed 35 to 40 percent of gross monthly income. Also, the amount you owe on credit cards, monthly car payment, student loans and other monthly payments should not exceed 10 to 15 percent of your take-home pay.
  • You might be living paycheck to paycheck. Cut expenses and develop a savings plan in case of emergencies or unexpected expenses. Use our benefit of spending less calculator to see just how much your budget reductions may be worth.
  • If your income and expenses equal each other, but only because you're using credit to survive and paying only minimums each month, you may need to talk to a debt counseling service to help you get back on the track to live within your means.
If you have money leftover at the end of the month, you're doing a good job of managing your expenses. Some suggestions of what you could do with the leftover money:
  • Open a savings account.
  • If you already have a savings account, consider setting up automatic transfers to your savings account or, if you have direct deposit, ask your employer to put a portion of your paycheck automatically in to your savings account.
  • Investigate whether your employer offers a 401(k) or other employee matching savings plan. The contribution you make to this type of account is taken out of your paycheck before taxes.

Continually monitor

Once you’ve created your budget, be sure to continually monitor it to make adjustments as needed in order to achieve your financial goals and stay on track.