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Money Matters: Proper Budgeting


Expenses

Have you considered sitting down and making a proper budget for your household? A lot of people might do simple budgeting based on their checkbook, but many people don’t sit down and actually calculate their expenses versus what they are bringing in every two weeks.

There are simple ways to keep your household budget balanced. Practical Money Skills offers these tips to help you.

1. Add Up Your Income 
To set a monthly budget, you first need to determine how much income you have. Using the worksheet at the bottom of this page, write a dollar figure next to each relevant income source. Make sure you include all sources of income such as salaries, interest, pension and any other income–including a spouse’s income if you’re married.

If you get a salary, be sure to use your take-home pay rather than 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 along with the amount under “other income.”

2. Estimate Expenses 
The best way to do this is to keep track of how much you spend for one month. The worksheet below divides spending into fixed and flexible expenses. Fixed expenses are those that generally do not change from month to month, such as rent and insurance payments. Flexible expenses are those that do change from month to month, such as food or entertainment. If some of your expenses for one or more categories change significantly each month, take a three-month average for your total.

3. Figure Out The Difference 
Once you’ve totaled up your monthly income and your monthly expenses, subtract the expense total from the income total to get the difference. A positive number indicates that you’re spending less than you earn–congratulations. A negative number indicates that your expenses are greater than your income. This means you will need to trim your expenses in order to begin living within your means.

Well done–you’ve created a budget. The next step is to track your budget over time to make sure you’re sticking to it. If you find you aren’t able to follow your budget successfully, it may mean that your plan isn’t flexible enough. It can take revisiting your budget a few times to find the balance that works for you.

Here’s a link to a budget worksheet you can use!

Here’s a link to a budget calculator to help you out!

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3 responses

  1. Pingback: » How to Manage a Household Budget AtHomeSense.com

  2. Pingback: Creating and using a budget «

  3. Pingback: Money Matters: How to establish a Budget « Wisconsin State Treasury

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