How It Works
Budgeting helps you meet your goals and prioritize your expenses. Creating a list of how much money comes in and how it’s spent is the first thing you should tackle when trying to figure out how to make a budget. This income budget calculator provides a way to create such an expense list. And, as you enter your information, this calculator will help you consider how to create a budget plan that will work efficiently for you. To use the calculator:
- Enter your monthly, after-tax income.
- Select Add Another to add an expense.
- Use the dropdown arrow for each expense to adjust the label or delete it entirely.
- To the right of each individual expense, enter its cost or how much you plan to spend.
7 Beginner Budget Questions
1. What is a budget?
A budget is a financial spending and savings plan that’s used to help people meet their financial goals and/or find financial wellness. Everyone’s budget is different depending on their situation, but the rules of a budget are always the same—assign a portion of your income to a variety of specified expenses (all different percentages) and only spend the amount set aside for that expense.
Budgeting Tip: Envelope Budgeting —placing specific amounts of cash in categorized envelopes—is a great beginner budgeting tool.
2. What are some useful budget categories?
Budget categories are different expense groupings. For example, gas, parking, and vehicle maintenance would all go into one category—Transportation. Some of the top envelope budget categories are:
- Dining Out & Entertainment
3. Should I use net or gross income when calculating my budget?
It’s very important to use net income(after-tax income) to calculate your budget. The idea is to get a good idea of all your spendable income, which means it’s the amount that is entered into your bank account every paycheck and not your full gross salary.
4. How can I properly record my monthly income & expenses?
Understand that expenses range from fixed or constant monthly costs—rent, loan payments, etc.—to variable expenses which are always changing. While creating a budget, it’s important to know how much money is filtering in and out of your bank account. Here’s how to properly record your money’s turnover rate:
- List your fixed monthly expenses.
- Calculate non-monthly fixed expenses or bills that you pay every quarter or six months.
- Create a list of your variable monthly expenses (your expenses that change).
- Compare what’s coming in with what’s going out.
5. How do I track my monthly expenses?
Tracking monthly expenses takes dedication, but, with the amount of technology we have today to help us, it’s also not hard. To keep it simple, start by tracking these 3 categories:
Bills: Even if you don’t have electronic statements on all your bills, it should still be possible to get a printed version of how much you spend on everything from rent to utilities and internet.
Shopping: This is slightly more difficult than calculating your bills because it generally changes. A good way to figure out how much you usually spend on food, clothes, hygiene products, etc. is to add up the total amount spent on each category and divide it by the number of products/categories you’re considering. This will give you a good average.
Debt: Tracking how much debt needs to be paid off for each monthly budget plan is another beast entirely. There are some great debt strategies you can try like the snowball or avalanche methods. Once you’ve learned a little about which route you’d like to take, it’s easy enough to plan how much of your income should be going toward debt each year/month.
6. What qualifies as debt?
Any dollar amount that has been borrowed from an institution or person would count as debt. This includes credit card balances, mortgages, car loans, personal loans, and so on.
7. How can I apply the 50/30/20 Rule to my personal budgeting plan?
According to the 50/30/20 Rule, a balanced budget allocates 50% of income to needs (rent, utilities, food, etc.), 30% of income to wants (unnecessary clothing, jewelry, restaurant food, entertainment, etc.), and 20% of income to savings (emergency funds, retirement, etc.). All you’d have to do to apply this to your budget is divide your income into these three categories and stick to them.