- 1). Write down all income received in a given month. Include salary, bonuses and any other outside earnings such as investments, real estate and family business profits. If earnings vary from month to month, add your last three months or more first and then divide them to find a monthly average.
- 2). List all necessary monthly expenses, like mortgage, auto and insurance. Then write down any other monthly needs, such as utilities, groceries and household supplies. These needs can vary monthly but still are payed regularly. If these household expenses vary to much each month, it is a good idea to take a three-month average for these expenditures as well.
- 3). Keep a record of everything else you spend out of pocket on a weekly basis. Start with at least one week and keep track of cash receipts, debit and credit card purchases. Count everything you spend that is not written down on your must-pays or needs lists. It is better to track this type of spending over several weeks to come up with an accurate monthly estimate.
- 4). Break these out of pocket expenses down into subcategories such as "weekly snacks" or "work allowance" funds. Then you can take expenses like lunches with coworkers, vending machine and coffee expenditures and fit into these broader categories. Determine an average amount you spend on these items in a week and multiply by four to determine your monthly pocket expenses.
- 5). Add your budget category totals together, including average amount spent on must-pays, needs and pocket expenses, and subtract this total from your average monthly income to determine an average balance left over. Expenses within categories can then be adjusted and cut backs made to free up income for savings.
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