#Monthly expense calculator how to#

For example, you may get a promotion and make more money, which means it’s time to rework how you’ll categorize it. Keep in mind that your spending plan may evolve with time. Here’s how you might calculate your monthly expenses based on the percentages for your four categories: Overview of Monthly Expenses For example, let’s say your household income is $60,000 a year after taxes. Once you’ve categorized your expenses and come up with a percentage-based budget, you can finetune your spending. It’s up to you to establish a conscious spending ratio that fits your needs and lifestyle. Some people stick to the 50/20/30 rule, for example, which dictates that 50% of monthly income (after taxes) should go toward obligatory expenses, 20% should go toward repaying debts (like student loans) or savings, and the remaining 30% should go toward everything else. Any expense should fit into one of these labels.ĭivide expenses into budget categories to establish a budgetary guideline. Then, divide your expenses into the categories described above. Start by simply making a list of all the money that goes out every month - you can use an expense-tracking app to keep track if you’re not sure - or just look at your last three months of bank statements. Examples could include:Ĭalculating your monthly expenses doesn’t require a pricey personal finance manager or a complicated budget calculator. This is the stuff you buy that you don’t necessarily need to survive but that improves your quality of life and brings you joy.

Predictable expenses that aren’t paid as frequently (e.g., car maintenance)Įxamples of guilt-free spending as monthly expensesįinally, with the above essentials taken care of, you have your guilt-free spending left.

Big-ticket purchases, like a down payment on a house or car.

An emergency fund for unforeseen expenditures, from health care bills to computer repairs.

Possible types of savings include extra money for: You can set up sub savings accounts to divert money for these distinct needs, making it easier to keep track. Savings can be used for various purposes.

Retirement accounts like a 401(k) or Roth IRA.

Investments could include monthly payments into the following: While some investments perform best long term, there are also short-term investment possibilities. Putting money into investments that grow can help your money keep up with inflation.

Transportation costs like gas, car payments, or public transportation ticketsĮxamples of investments as monthly expenses.

Food, including groceries, takeout, and restaurant dining.

Utilities like electricity, gas, and water.Housing costs like rent, renters insurance, or mortgage payments.

Although you can rarely cut fixed costs completely, reviewing them can help you find ways to reduce them. These are the things that you can’t eliminate because, let’s face it, you can’t really live without them. To make your conscious spending plan even clearer and easier to adhere to, it’s best to break it down into four distinct categories:įixed costs refer to expenses that you can’t forego. A monthly budget is also easier to manage than an annual budget since you have a smaller period to keep track of. This is also a manageable time frame to work with if you are employed and paid in a set period once or twice per month. Since many expenses (like rent) are inherently calculated on a monthly basis, most people make monthly budgets. This could include essentials like rent, utility bills, gas, food, child care, and health insurance, as well as nonessentials, like beauty treatments, entertainment (e.g., your Netflix subscription), and travel. So, just what qualifies as an expense? At its core, an expense is anything that you are spending money on - it’s the money that’s going out, not coming in.

#Monthly expense calculator how to#

This guide explains how to calculate your expenses according to the conscious spending mindset. This makes for a sustainable approach to saving, investing, and general money management and can result in a more stable financial future. Instead of scrounging to save money, allow yourself those treats you truly enjoy while cutting costs on those things that don’t improve your happiness or quality of life. When setting up your 2022 budget, try a “conscious spending” approach. While the thought of examining the money you spend may be daunting at first, this is one of the first steps in setting a monthly budget that works for you (i.e., one that covers your basic needs and wants without leaving you feeling like you’re living a life of denial). Tracking expenses can help inform smart money management, ensuring you have clear oversight and control over your finances.