You make decisions each day, although not always consciously, on how to spend or save the income you have. By keeping a simple daily or weekly budgetA budget is both a spending plan and a list of spendable funds. , you can become aware of how you might cut an expense and save for something you really want. Or just be able to meet your basic expenses without having to decide which bills to pay and which ones to put off.

There are 3 simple steps to begin managing your money:
  1. Identify the amount of income available.
  2. Identify the expenses which need to be covered.
  3. Prioritize short-and long-term goals.

Individuals, households, government, businesses, and other organizations all budget with these ideas in mind. Making a budget for spending and saving will help you reach your goals in a time frame that works for you.

Average Annual
Household Expenses

Apparel and service4%
Cash contributions3%
Personal insurance
and pensions
All other expenditures7%
Consumer Expenditures in 2010, Bureau of Labor Statistics 03/16/12. Percentages derived from average annual expenditures of $48,109 for an average household size of 2.5 persons.

The Budgeting Process

Sample Expense List

Expense Amount Type
Mortgage $950 F
Car Payment $600 F
Insurance - Auto $150 F
Insurance - Life $60 F
Phone $75 V
Utilities $125 V
Groceries $250 V
Entertainment $250 V
Gas/Tolls $100 V

A good way to begin a budget is to list all your monthly expenses. Start broad and then get more specific (ie. Housing: mortgage/rent, repairs, insurance, utilities. Food: Groceries, dining out, snacks, coffee).

Next, categorize your expenses by fixed expensesExpenses that do not generally change from month to month (e.g., rent, car payment, health insurance, union dues, etc.). , variable expensesExpenses that vary from month to month (e.g., auto repairs, utility bills, food, phone service, etc.). and occasional or periodic expensesExpenditure of money that occurs from time to time, not on a regular basis. .

As you go along, note which expenses are wantsGoods and services that an individual would like to have (e.g., an upgraded computer, a sports car, dance training, etc.). and which are needsGoods and services that an individual must have to survive; e.g., food, clothing, shelter. , or basics and luxuries. This will be important to keep in mind when you are finding extra savings to put towards your financial goals.

Make sure to divide your periodic expenses over 12 months (ie. If you pay $1200/year in car insurance, make sure that you include $100 a month for car insurance).

Then list your income (paycheck, government benefits, or gifts of money).

Below is a simple budget tool designed to intake your expenses, debts, and income and assetsAnything of value owned by a person or business (can also include money owed to a person or business). in order to show your net deficitThe insufficiency of revenues relative to outlays. Or the amount by which a sum of money falls short of the required amount. or surplusThe amount by which revenue exceeds expenditure. Or the money left over after all expenses have been met..


For a more detailed breakdown of monthly expenses, try downloading this form.

Download Form as XLS

  1. 1Expenses
  2. 2Income & Savings
  3. 3 Budget review

Enter your monthly expenses.

Enter your monthly income and savings.

This is a summary of your Budget.

Finding Savings

Once you have an idea of what you are actually spending each month, compared to your income, take a moment to consider the areas you may be able to cut back a little (the expenses you categorized as luxury expenses, or maybe some of your variable expenses). By identifying where you can reduce your actual spending you can project how much you expect to be able to save in the future.

Tips for finding savings within variable expenses:

  • becoming an energy-efficient family to reduce utility bills,
  • eating most meals at home to save food costs,
  • buying clothes only when on sale,
  • walking or using public transportation instead of driving.

Some fixed expenses can be adjusted:

  • mortgages can be refinanced,
  • insurance restructured with lower cost providers and higher deductibles.

In the next section we will go over ways to handle the money left over and what to do if you are coming up short.

Paying Yourself

Did you put “savings” as an expense in your budget? Why or why not?

It is important to prioritize “paying yourself first”. You deserve it. Start by adding “savings” as a monthly expense in your budget. The first step in saving is to start putting money away over the short term towards your emergency fundMoney set aside or budgeted for unanticipated but necessary expenditures. . Once you have an emergency fund established, you can start saving to meet your financial goals. (For more information on savings and emergency funds, see the section on Saving and Investing).

  1. 1Expenses
  2. 2Income & Savings
  3. 3 Budget review

Enter your monthly expenses.

Enter your monthly income and savings.

This is a summary of your Budget.