Like it or not, you’ve reached adult status.  You have bills, you get a paycheck.  By taking inventory of your monthly expenses you’ll get a full understanding of your financial position.  When you create a monthly budget, you are equipped to make better purchasing decisions.

Before you can decide how much money you can afford to spend, you need to create a list of recurring monthly charges and evaluate your total income.  Using a spreadsheet is the best method to organize and analyze.

Calculate your monthly Net Income

Net income is the amount of money that hits your pocket, after deductions.   With this number in hand you can determine what you have available to spend each month.

Make a spreadsheet of monthly expenses

Every month you pay rent/mortgage, car payment, loan payments, utility bill, and cell phone bill.  You likely have miscellaneous monthly payments for health and entertainment like your gym membership, cable, Netflix.  Put all of these recurring monthly bills in one column, and list the amount in the next column.  Use the autosum function to determine your baseline.  If you pay childcare or you buy a monthly train pass, include these recurring charges.

Analyze regular spending

This is easy to do if you use a debit or credit card for most purchases.  Log-in to your account and look at the previous month’s statement.  Using the same spreadsheet track what you spent on groceries, gas, clothes and restaurants.  If you are a regular at the pet store or the liquor store, get a haircut every month, include those purchases too.   If you don’t use plastic to pay for these regular purchase, save receipts for month and create a log of your spending.

In analyzing your daily spending habits, you may find an area that can be adjusted to reduce your average monthly expenses.  Some purchases like groceries and gas cannot be forgone, but if the budget is tight you can create a strategy to reduce. 

We are all guilty of running into the store for one item, and leaving with 9 bags and receipt showing $134.00!  Make a list prior to shopping and stick to it.  If your budget is $100 per week for food, take cash with you and leave the credit card behind.  With this technique you cannot overspend!  It also helps if you do not grocery shop while hungry.   

Don’t forget to account for annual, bi-annual & quarterly payments

If you can afford to pay expenses up front; like your car insurance or gym membership, you’ll save money.  In order to make sure you have the funds to cover the premium when due, make a monthly transfer to a savings account.  Total up the full premiums for the year and divide (by 12) to determine your monthly saving figure.    

Do the math!

Once you have an outline of your fixed spending, you can adjust your variable spending as needed.  You have to pay your monthly car payment, but you don’t have to splurge on lunch every day.  Small adjustments can lead to quick savings.  Savings tip: Try a carpool once a week and watch your gas expense decrease. Looking for more tips? We've put together a list of a few changes you can make around the house to help you save money while saving energy.

Create a plan, and stick to it

Your fixed expenses are set.  These are mandatory payments each month that typically increase over time.  A majority of these bills are negotiable, however and it is likely that you are paying too much!  Here are some stellar negotiation tips.  If you don’t have time to navigate the call center obstacle course, let Shrinkabill’s experts lower your fixed monthly expenses

Review your discretionary spending and determine where you can cut back.  Let’s say you find that you restaurant spending is high, designate a specific dollar amount for the month and eat out accordingly.  If you know that you’ll be going out to celebrate a birthday mid-month, eat at home this weekend.  Set a goal to meet the budget and check back each month.   

Evaluating your budget can be scary, but the unknown is much more terrifying.  Arm yourself with a plan and you’ll be equipped to reach your goals.