To create a budget, you need to compare your regular income against the cost of essential needs. If you find that your income is less than what you need to cover your necessities, you will need to find a way to cut costs or increase your income. If you find that your income is greater than the cost of needs, you have leftover money to spend on discretionary items.
Using a Budget Sheet to Manage Income and Needs
A budget sheet, or spreadsheets, is a great visual tool for tracking income and expenses. With just a glance, you can see what you’re spending and how your costs compare to your income. Furthermore, research has shown that people who budget are more likely to be financially healthy. To get started, you will need to gather all your pay stubs and other income information along with your receipts for an entire month. If you use a debit or credit card to pay for your needs, this information will be on your monthly statement. If not, you will need to collect the receipts yourself.
Tracking Your Income
This sheet is where you will track the money you bring in each month. If you’re unsure (for example, if your tips vary from month to month), you’ll need to keep an accurate record for at least two months. However, you can estimate your tips for now.
Monthly Income Source
Source 1:
Source 2:
Source 3:
Total:
Tracking Necessary Expenses
This sheet consists of all the bills you have to pay, although not all categories (like property taxes) may apply to everyone. Many of these costs can also be reduced by shopping around. Various categories are used to fill in the costs of non-discretionary personal care, such as elder care.
Necessary Expense
Estimated Monthly:
Actual Expense:
Rent or Mortgage:
Groceries:
Utilities (electricity, gas, heat):
Water and Sewage:
Garbage Collection:
Health Insurance/Premiums:
Car Insurance:
Car Repair/Maintenance/Fuel:
Public Transportation:
Phone (landline and mobile):
Loan Payments:
Home/Renter’s Insurance:
Homeowner Association Fees:
Property Tax:
Life Insurance:
Haircuts:
Basic Hygiene Supplies:
Child Care:
Clothing:
Retirement:
Miscellaneous 1:
Miscellaneous 2:
Total:
Next Steps for Managing Money
After determining the relationship between your income and necessary expenses, you are on the right track to managing your budget. If you find that your necessary expenses equal or exceed your income, you will need to find more ways to save.
Before you start cutting costs, it is important to get a complete picture of what you are actually spending. Very few people spend only on necessities. Discretionary expenses are part of everyone’s life. This includes the money you spend on dinner with a friend, Christmas gifts, and vacations.
If you’re like most people, you’ll want to save some money to give yourself more flexibility. The good news is that saving money becomes easier once you know the areas you need to target.
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Resources:
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
Jing Jian Xiao and Barbara O’Neill. “Mental Accounting and Behavioural Hierarchy: Understanding Consumer Budgeting Behaviour,” Page 11. International Journal of Consumer Studies.
Source: https://www.thebalancemoney.com/budget-worksheet-income-and-necessities-453596
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