Perhaps, like me, you may have put off figuring out how to organize your monthly expenses. The idea is overwhelming, but knowing how much money is left at the end of each month is a good thing. So, this is where I commit to track my monthly expenses, which helps me save money and keep making progress toward my financial goals.
There are a lot of rules and personal preferences, that can influence the result of organizing monthly expense report. If you are new to budgeting or just need a refresher, here are some tips to help you get started:
Add up all of your monthly income
Getting a handle on your monthly expenses starts with knowing how much money you get each month.
Add up all the money you make each month. Include your salary, investments, and any other money you make. This can be hard if you have more than one job that pays different amounts every month or if you get bonuses at certain times of the year. You might want to average these numbers to get a better idea of what your average salary has been over time.
Categorize your expenses
Every single one of us has unique expenses that are specific to our situation. But we’ll focus more on the broad categories that can occur during a typical adult life. Look at the two common types of expenses below and decide how yours fits in.
- Fixed expenses are expenses that don’t change no matter what you do. Most people think of fixed expenses like monthly rent, which stays the same even if you move out of your apartment or don’t pay it one month. Another example of a fixed expense is the amount of money you pay in taxes every year.
- Variable expenses are those that change depending on the situation. They may not be a regular part of your budgeting process, but they do come up sometimes or often. Things like car repairs and medical bills are examples of things that come up in life.
Add up your fixed expenses
If you have to prioritize one thing every month, it should be your fixed expenses. The costs you have every month, like rent and loan repayments. They’re the costs you have every month, like rent and loan payments. These costs are the basis of your budget, and you’ll be thinking about how much money you have left over each month after paying them.
Here’s a look at some common fixed expenses:
- Utilities (electricity, gas)
- Car payment or lease
- Credit card payments (or other loans)
Estimate your variable expenses
Now that you’ve estimated your fixed expenses, it’s time to figure out your variable expenses, which is also a big part to organize your monthly expenses.
Think about how much money you spent on your variable expenses in the last month or two. You can also look at your bills from last month to get an idea of how much they were and make changes as needed. If you get a promotion or a raise and your income goes up or down, this is a good time to look at how much of your income you spend on these kinds of things.
Cut out unnecessary expenses
Reduce monthly spending by eliminating any extras you don’t absolutely need. If you really want something but it costs too much money, either wait until you have enough money saved up or put it off for a few weeks or months. When you don’t buy something right away, you might realize that you were just acting on impulse.
The golden rule is simple: Don’t spend more than what your salary can afford.
Create a spreadsheet or use budgeting app
It’s important to keep track of how much you spend each day so you can see how much money is left and see if you’re spending too much.
Using a spreadsheet to keep track of your spending is a great idea. It’s simple, it’s free, and you can save it on your computer or phone so you can always use it.
Organizing your expenses in an online budgeting app is another great option if you don’t want to create the spreadsheet yourself or are more comfortable using technology. Some popular options include Mint, You Need a Budget (YNAB), and Personal Capital.
At the end of the day, it doesn’t matter how you organize your monthly expenses as long as you do. If you don’t know where your money goes each month and how much debt you’re getting, it will be hard to save up for your financial goal or something you really want. Knowing where each dollar goes each month can also help you make a budget so nothing gets out of hand. The best advice I can give is to start tracking your spending right away, even if it’s just on an Excel spreadsheet at first.