Similarly, if you’re paid every 2 weeks you’ll get 2 “bonus” months where you receive an extra paycheck (because there are 26 pay periods over 12 months). If you want to get more detailed (or if you are a spreadsheet and data nerd like me), you might want to track your total gross income and your payroll deduction expense separately.Įither way is perfectly fine, so just get tracking! If you have a commission-based or other variable income, you may have to estimate this number one month at a time for your budget, or try to determine an average. It’s an easier number, and it also eliminates some other expense categories you have to track because it’s taken directly out of your paycheck. If you’re just getting started, I would recommend tracking net income. Net income (after all payroll deductions, this is the amount that actually hits your bank account).

Gross income (before taxes and other payroll deductions such as health insurance premiums and 401(k) contributions are taken out).How can I track my expenses automatically?įirst things first, you should have a handle on all your various sources of income and how much you expect to bring in each month.How much should I be spending in each category?.What categories should I include in a budget?.They then divide the amount of money needed by the timeline to calculate how much they should save each month. This method is a variation of the pay yourself first budget, in which people create multiple savings accounts, each for one specific goal (such as a vacation or a new car), and each with an amount of money that should be reached by a specific date. The most important part of this method is to put one's savings apart before spending on anything else. They can also choose a 70/30, 60/40, or 50/50 budget for more savings. In the pay yourself first budget people first save at least 20% of their net income, and then freely spend the remaining 80%. Pay yourself first method (80/20 budget) 50% of one's net income then goes towards needs, 30% towards wants, and 20% towards savings. The 50/30/20 budget is a simple plan that sorts personal expenses into three categories: 'needs' ( basic necessities), 'wants', and savings. There exist many methods of budgeting to help people do this. In the most basic form of creating a personal budget the person needs to calculate their net income, track their spending over a set period of time, set goals based on the information previously gathered, make a plan to achieve these goals, and adjust their spending based on the plan. People who budget their money are less likely to obtain large debts, and are more likely to be able to lead comfortable retired lifes and to be prepared for emergencies. Having a budget can help people feel more in control of their finances and make it easier for them to not overspend and to save money.

Personal budgets are usually created to help an individual or a household of people to control their spending and achieve their financial goals.

2.3 Envelope method (cash-only budgeting).

2.2 Pay yourself first method (80/20 budget).

1 Purposes of creating a personal budget.

Personal budget categories