Calculating your Monthly Budget
Knowing your monthly budget is one of the most important things you should know to become financially independent. It not only helps you calculate your yearly budget but it will help you be in control of your finances.
And because taking control of your finances gives your FREEDOM, this is a must know to become Financially Independent.
Let’s get started
Open a new excel workbook
Firstly, on column A will we start listing our sources of income. In this case as white-collar employee, I get two pay-cheques most months, except for two months in the year where I get paid 3 times. After adding those two to your list, add an EXTRA row for anything that comes to your life unexpectedly.
Secondly, we are going to make a list of all the expenses that are fixed and that have an exact day when they need to be paid. It is up to you but you can add a date beside the amount to know exactly when that money will be removed from your account or that you will have to pay for it.
Thirdly, we are going to lay down all you expenses that can fluctuate during the month. Even though this expenses are not fixed, we should try to MAX them out. Meaning, that you need to come up with a number that you can spend and still survive to the next month without not knowing how you are going to pay rent.
Finally we will add all these expenses up.
To finish out very simple excel sheet. We will calculate how much we will have left over after paying all our bills. This number can be carried through as an extra income for the following months.
See example below regarding carrying your left over money as extra income for the next month
I wan to clarify something and I think it goes out without me saying it bur you expenses should not be higher that you actual income. The moment you expenses become larger than you money coming in is when you start having debt and borrowing from credit cards. It is very important to understand how much you make and how much you should be spending in regards with this number.
This is why I cannot stress enough how important it is for you to know what your true income is and what your expenses are. It is very easy to ignore what is going on when you don’t take the time to look into what you are spending and how much you are spending on this. I really encourage you to create a small excel sheet to calculate your monthly expenses. This should take you around an hour, after you figure out what your expenses are and you set it all up.
Try it out. Leave me a comment if you have any questions and if you feel like you have more private questions, send me a message through the contact me page which will be private.
Have a wonderful week. LOVE Ursula Keith