Using your pay stub to calculate your monthly budget
July 9, 2017
Putting together your monthly budget so that you have money left over at the end of the month instead of month left over at the end of the money requires using your pay stub so that you know how much money you have to spend. Here's how I do my monthly budget.
I start by adding up all of my monthly expenses and putting them into a spreadsheet. I just keep every receipt from every time I spend money for the month, throw them in a drawer, and at the end of the month I pull them out and add them up. Whatever they say is what I spent. Here's an example of that spreadsheet.
I made the numbers up, but they are close to what it costs someone to live alone in a 1 bedroom or efficiency apartment where I live. As you can see, this person's monthly expenses are $1,810 per month.
The next thing that I do is grab a copy of my real pay stub and look at the Net Pay on my paystub. In this example paycheck stub this person is paid $1013.06 every two weeks, or $2026.12 a month.
This person has a monthly surplus of $216.12 a month after they pay all of their routine, day to day expenses. Plus people who are paid every other week are paid 26 times a year, which means two months a year this person will get a "bonus" of $1013.06 more than they have budgeted. That sounds great, doesn't it? $216 a month plus another $2026 a year more than he needs to live on? Yeah, that would be nice if you didn't need to buy clothes, get the oil changed in your car, go out with friends every now and then, etc.. Once you add those expenses on top of this person's daily living expenses this person doesn't have much disposable income left! If I was giving this person financial advice, I'd suggest that they get a roommate so that they can split the rent, electric, and cable bills with that other person. If they do that, they'll need a 2 bedroom apartment but they'll still save over $400 a month which will give them a much better lifestyle until they increase their income by earning pay raises at work or finding a job that pays better.
This is how I calculate my monthly budget and the most important thing to keep in mind when you're doing this is be honest with yourself. Don't lie and say, "This month was an exception, I'll spend less next month." Be honest about your income and expenses and use that information to plan so that you know that you won't run out of money before the end of the month.