Budget Explanations And Example
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A budget is the culmination of a fairly involved process; not difficult, but it involves gathering a lot of data. Some lines, such as line 11: Utilities (below), are totals from previous work sheets; not included here for simplicity. The process is easy, though: the work sheet for a budget line (category) would list all the expenses (or income items) in that category; the total of the work sheet would be the figure you list on the budget line. You could, of course, list every single expense and income item on your budget page; but I find that creates a document too cumbersome to be a good tool. Key lines of the below Example are linked to explanations (located below the budget table).
This should be first on your priority list - except for paying off credit card balances. No matter how modest your income is, you should always save for the future. An easy way to fulfill this important task is to set up an automatic monthly (pre-authorized) transfer. Most Banks, Mutual Funds, and Brokers will regularly transfer cash from your Bank Account (or Money Market Account) into any of a number of accounts they handle. Saving 10% of your gross income (include IRA or 401k contributions) is a good minimum goal. Line 10: Housing (rent or mortgage, etc.) Include any home related insurance (homeowners or renters), taxes (property), and interest on loans. You can also include here expenses for home maintenance such as: paint, cleaning, and repair; along with utilities. Alternatively, you could create separate categories (as I have) for Housing, Utilities, and Home Maintenance. Line 11: Utilities This one category may take some time to compile. If possible use one year's worth of receipts to average your monthly bills. Don't include items such as cable TV here, as that belongs in the Entertainment category. Line 13: Transportation (purchase, lease, or public) This category contains: vehicle payments, rideshare fees, public transportation expenses, etc.. Any vehicle maintenance expenses: gas, oil, license, insurance, etc.; can be listed on a separate line for tracking. Line 17: Books, Periodicals, Online Services This could be considered a sub category of Entertainment, however, I've added it here because many books, periodicals, and online services may be for business or investment purposes (tax deductible). Line 18: Entertainment (TV, movies, CD's, vacation) No one expects you to do entirely without entertainment, but, this may be one area to cut costs. Remember, cutting costs does not necessarily mean reducing the amount of your entertainment.
Line 19: Debt Repayment (credit card, school, etc.) Repayment of these is a top priority, especially, since the interest is no longer tax deductible. Line 20: Other Expenses Some of the other expense categories you may have are: tithing, education, child care, gifts, job related, home improvement, medical and dental. Line 22: INCOME, NET minus Expenses The difference between lines 7 and 21. This line should not be negative; also, it shouldn't be too large. If it is large you have the happy task of adjusting your expenses (especially personal savings) upward. Do not consider this remainder "money to burn" that would be a regular expense item within the Entertainment category. Remember, this amount is your "cushion" for unforeseen expenses etc..
| 1998 Monthly Budget Example - Bonehead Finance 01: INCOME, GROSS, Monthly Average
2200
02: Payroll Deductions: 03:
Taxes (Federal, State, etc.)
440
04:
Savings Plan (401k, 403b, credit union)
132
05:
Other (medical, dental, etc.)
06:
Total Payroll Deductions
48 620
07: INCOME, NET (Gross minus Deductions)
1580
08: Expenses: 09:
Personal Savings (pay yourselves first)
120
10:
Housing (rent or mortgage, etc.)
600
11:
Utilities
125
12:
Home Maintenance (laundry, toiletries, upkeep)
13:
Transportation (purchase, lease, or public)
0
14:
Auto Upkeep (gas, insurance, license, etc.)
50
15:
Food (groceries + dining out)
35
200
16:
Clothes
50
17:
Books, Periodicals, Online Services
50
18:
Entertainment (TV, movies, CD's, vacation)
50
19:
Debt Repayment (credit card, school, etc.)
200
20:
Other Expenses
21:
Total Expenses
0 1480
This should be first on your priority list - except for paying off credit card balances. No matter how modest your income is, you should always save for the future. An easy way to fulfill this important task is to set up an automatic monthly (pre-authorized) transfer. Most Banks, Mutual Funds, and Brokers will regularly transfer cash from your Bank Account (or Money Market Account) into any of a number of accounts they handle. Saving 10% of your gross income (include IRA or 401k contributions) is a good minimum goal. Line 10: Housing (rent or mortgage, etc.) Include any home related insurance (homeowners or renters), taxes (property), and interest on loans. You can also include here expenses for home maintenance such as: paint, cleaning, and repair; along with utilities. Alternatively, you could create separate categories (as I have) for Housing, Utilities, and Home Maintenance. Line 11: Utilities This one category may take some time to compile. If possible use one year's worth of receipts to average your monthly bills. Don't include items such as cable TV here, as that belongs in the Entertainment category. Line 13: Transportation (purchase, lease, or public) This category contains: vehicle payments, rideshare fees, public transportation expenses, etc.. Any vehicle maintenance expenses: gas, oil, license, insurance, etc.; can be listed on a separate line for tracking. Line 17: Books, Periodicals, Online Services This could be considered a sub category of Entertainment, however, I've added it here because many books, periodicals, and online services may be for business or investment purposes (tax deductible). Line 18: Entertainment (TV, movies, CD's, vacation) No one expects you to do entirely without entertainment, but, this may be one area to cut costs. Remember, cutting costs does not necessarily mean reducing the amount of your entertainment.
Line 19: Debt Repayment (credit card, school, etc.) Repayment of these is a top priority, especially, since the interest is no longer tax deductible. Line 20: Other Expenses Some of the other expense categories you may have are: tithing, education, child care, gifts, job related, home improvement, medical and dental. Line 22: INCOME, NET minus Expenses The difference between lines 7 and 21. This line should not be negative; also, it shouldn't be too large. If it is large you have the happy task of adjusting your expenses (especially personal savings) upward. Do not consider this remainder "money to burn" that would be a regular expense item within the Entertainment category. Remember, this amount is your "cushion" for unforeseen expenses etc..
| 1998 Monthly Budget Example - Bonehead Finance 01: INCOME, GROSS, Monthly Average
2200
02: Payroll Deductions: 03:
Taxes (Federal, State, etc.)
440
04:
Savings Plan (401k, 403b, credit union)
132
05:
Other (medical, dental, etc.)
06:
Total Payroll Deductions
48 620
07: INCOME, NET (Gross minus Deductions)
1580
08: Expenses: 09:
Personal Savings (pay yourselves first)
120
10:
Housing (rent or mortgage, etc.)
600
11:
Utilities
125
12:
Home Maintenance (laundry, toiletries, upkeep)
13:
Transportation (purchase, lease, or public)
0
14:
Auto Upkeep (gas, insurance, license, etc.)
50
15:
Food (groceries + dining out)
35
200
16:
Clothes
50
17:
Books, Periodicals, Online Services
50
18:
Entertainment (TV, movies, CD's, vacation)
50
19:
Debt Repayment (credit card, school, etc.)
200
20:
Other Expenses
21:
Total Expenses
0 1480
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