Gather your financial statement.
Before you can dig into personal budgeting, you need your financial information. Maybe you can get all the information you need by logging into your bank account or maybe you need to gather paper statements. If you can, get 12 months of records. If you don’t have records going back that far, then find what you can.
Record all sources of income.
Look over your paperwork and record all sources of income. You can’t make a budget without knowing how much you’re bringing in each month. Record your net pay, not your gross pay. Your net pay is your “take home pay.” It’s what is actually deposited in your bank account after your employer deducts taxes, benefits, and any 401K contributions. Remember to include any source of regular income.
If you’re working a side job and it brings in monthly income, include it. If it’s only sporadic income, then don’t include it. If you work a job where you’re paid commissions or you’re not getting the same pay month-to-month, then you’ll want to look over your records and calculate your average monthly income.
Create a list of monthly expenses.
List all your monthly expenses and other financial obligations: rent, cell phone bill, car payment, student loan payment, clothing purchases, medical expenditures, etc. You may want to group, going out to eat, going out with friends, and other smaller, irregular items as “miscellaneous” expenses. You should take a critical look at those expenses. The cost can creep up and many people don’t realize how much they’re spending on those things.
Huntington Customer Tip:
The Hub offers Spend Analysis, which categorizes and analyzes what, where, and how you spend. This tools easily tracks those variable or miscellaneous purchases that add up in everyday life.
It’s important to remember to include bills that may not come every month. In some areas, water and sewer bills arrive every three months. Some states charge personal property taxes twice a year. Remember your annual bills like your vehicle registration or your driver’s license renewal. Also, be sure to note any medical bills you’re paying, any streaming services you’ve subscribed to, and any automatic shipments you have with any retailer.
Finally, remember to pay yourself. If you’re already transferring money to a savings account every month, include that amount. If you aren’t, you’ll want to make sure that your budget allows you to put money into an interest-bearing savings account. This is your emergency fund and/or the fund you’ll use for big goals. You want easy access to this account. We recommend setting aside 5% of your income for this. This number may change as you build your budget, but it is a good solid starting point.
Huntington Customer Tip:
Huntington Spend SetterSM allows you to track and set spending limits for categories like Groceries, Restaurant, and Entertainment. A free tool to help you stay on track, monitor your pre-set spending limit, or analyze where you went over.
Fixed Expenses
Look at your list of bills and note which ones are the same every month or you expect will be the same for several months. Your rent may go up when you sign a new lease, but you can reasonably expect your rent to remain stable for the terms of your current lease. Unless you have an overage in data, most people can expect their cell phone bill to remain the same month-to-month. Car payments and student loan payments tend to be stable over long periods of time too. These are fixed monthly expenses.
Variable Expenses
Some bills are not fixed expenses. For example, your power bill will likely go up in the summer when you’re running the air conditioning and in the winter when you’re running the heat. Your water bill will vary each billing cycle based upon your water usage. Look over your records for these bills for the past year and calculate the average amount of the bill. You’ll make your personal budget for the average amount for a variable bill.
For example, if you budget $120 for your monthly power bill and you only need to pay $80 during a mild spring month, then send the power company $80 and put the remaining $40 in an interest-bearing savings account. That $40 may not earn much interest, but it will earn some. When you get a higher bill in the summer or winter, you’ll have the money in your savings account to cover the difference.
Huntington Customer Tip:
The Look Ahead CalendarSM in The Hub can help you plan ahead. You add expected deposits, bills, and transfers so you can visualize future patterns and see your monthly spending to better predict available cashflows. It’s also easily customizable to fit your unique spending patterns like gym memberships or meal-prep services.
Total your monthly income and monthly expenses.
This is the step where you really get into how to budget your money. Tally your monthly income and monthly expenses. Compare those two columns. You should have more income than expenses.
If you have more income than expenses, then you have a budget surplus. Your surplus will tell you if you can afford a more expensive car payment, a nicer apartment, or increase the amount you’re paying toward your debt.
If you have more expenses than income, then you have a budget deficit. This is a terrible position to be in, but it’s not insurmountable. You need to look over your records and figure out how to save money. Can you cut back on eating out? What about buying groceries in bulk to save on your monthly grocery bill? Do you need to consider a more affordable place to live? Maybe you can take a second job. If you must, you can cut back on the amount you’re putting into savings. Even if you’re only putting 1% into savings, that’s better than nothing and the money will help if you have an emergency.
Budget Spreadsheet Example
| Monthly Income | |
|---|---|
| Salary | $3,000.00 |
| Side Hustle (Avg.) | $100.00 |
| Total | $3,100.00 |
| Monthly Expenses | |
| Rent | $(1,000.00) |
| Groceries (Avg.) | $(250.00) |
| Student Loan | $(225.00) |
| Car Payment | $(200.00) |
| Credit Card | $(200.00) |
| Savings (5%) | $(155.00) |
| Misc. (eating out, going out, etc.) | $(150.00) |
| Power | $(120.00) |
| Cable/Internet | $(100.00) |
| Car/Renter's Insurance | $(100.00) |
| Annual Expenses (Monthly Avg.) | $(40.00) |
| Water (Avg.) | $(25.00) |
| Total | $(2,565.00) |
| Budget Totals | |
| Total Income | $3,100.00 |
| Total Expenses | $(2,565.00) |
| Budget Surplus/Deficit | $535.00 |
Set a goal.
Once you’ve adjusted your lifestyle so that you have a budget surplus, you need to set a goal for your money. Where are you in your life? Is this your first time living on your own and you know the car you’ve been driving since high school won’t last much longer? Are you thinking about buying a house or starting a family? Do you want to use your surplus to pay down debt or start an investment account?
Most financial advisors recommend having enough money in savings to cover 3-6 months of expenses in the event of an emergency like the loss of a job. Take your total expenses and multiply that by 3 (or 6). That’s the amount of money you want to have in your savings account. It might take a while to get there, but you’ll appreciate it when you need it. That should be your first goal. Any other savings goal should be on top of that amount.
