How to make a realistic budget?

Most of us don’t track our expenses, especially not our variable expenses which
typically change month-to-month, like groceries, toiletries and utility services.
Budgeting and saving money don't come naturally for obvious reasons. Spending
money on nonessentials is so easy, even if you're committed to a well-laid spending
plan.

Still, getting on track with a realistic budget and putting money aside may not be as
difficult as you think. Begin by taking the time to create a budget, which can help
you manage your finances, prioritize spending, and be in control of debt thus allowing
you to make progress toward your long-term financial goals. It is absolutely essential
to know how much you spend. Take some time tracking your variable expenses. You
can do this in a number of different ways.
We invite you to look at the following free online calculator which will show you
how much you make and how much you spend in an interactive way:

https://www.quicken.com/budget-calculator

This calculator will help you find the amount that you spend in different categories
such as Housing, Transportation, educational, Personal expenses, savings and would
help you find the most important number for budgeting your monthly surplus or
monthly deficit.

To help you fill in the information asked please gather into one place all your
electronic or paper bills, receipts, pay stubs, bank statements, and any other record of
income or expense for at least a month and keep track of monthly income and
expenditures as they happen.

Drill down into your expenses and further categorize them into fixed, variable and
discretionary.  Fixed expenses (such as your rent) remain the same from month to
month and thus often constitute the basis of your budget. Variable expenses such as
utility bills can typically be lowered with behavioral tweaks like ones provided in our
(payoff debt strategies course) , and discretionary expenses consist of wants rather
than needs and provide the most opportunities for saving.

Know your fixed expenses 

Fixed expenses include rent, mortgage payments, property taxes, car insurance, home
insurance, etc. If you have fixed expenses that you pay bi-monthly or twice a year, try
to calculate them based on 12 months, so you can put a monthly amount into
your monthly budget.  This will ensure that you leave enough money in your budget
each month to cover them when they become due. 

List your fixed and variable expenses

The next step is to list all of your fixed and variable expenses together, so you can get
a full picture of how much you spend in a typical month. You can do this manually by
writing them all down on one page, on your phone, desktop or tablet and simply plug
in your fixed and variable expenses. If you’re a couple, it’s a good idea to go over
your monthly expenses together to make sure nothing is missing. Again, compare it to
your bank statements and/or online banking transactions.

Record your monthly net income

It would be easy to budget if we all worked on salary and were paid on a monthly
basis, but that’s not always the case, especially given today’s gig economy and side
hustle jobs where people are supplementing their incomes by becoming an Uber
driver, dog walker, or renting out a room in their home on Airbnb. 

If you’re paid bi-weekly and your pay is always the same, simply multiply your pay
by two. If your pay fluctuates, add up your total income for the last 6 months and then
divide this number by 6 to get a monthly average. You can also look at your pay stub
and if it shows a year to date net amount you could take that figure and divide it by
the number of months. You can even use past tax returns to get a figure and divide it
by 12. Ensure that you include all money coming into your account each month,
including pension income, child support, child tax benefit and any other government
assistance payments you receive. 

Are you in a surplus or a deficit? 

If you have a surplus, great! But if you have a deficit, don’t despair. Take some time
to go through each expense item in your budget, one at a time, and ask yourself how
you might be able to reduce it.  It may just be a matter of cutting back on drive-thru
coffees on the way to work, or cutting back on gas by taking the bus once in a while
or joining a carpool. Even fixed expenses can be lowered sometimes. Call your cable
company and learn a bit more about what you’re paying for and see if there are
channels you can remove from your package. You can even consider changing
providers if you can get a better deal. Car insurance, house insurance — call them all! 
You’ll be surprised by how much you can trim off.

QUIZZ
What is your monthly surplus or monthly deficit.

What is your monthly surplus or monthly deficit?

Name 5 categories where you can start cutting spending on items you don't need

How much is the debt payment category on your monthly income?

How much taxes are you paying on your gross income?
Do you have automatic savings set up from your income as a monthly expense?
List 5 ways where you can shop smarter and live frugally from now on?