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How To Properly Budget and Calculate Your Monthly Payments

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As a part of proper budgeting, you will need to monitor your monthly payments. Budgeting is limited to food, rent, and utility expenses and how much you spend every month. By doing so, you will have a broad outlook and a better understanding of your monthly fees.

How To Properly Budget and Calculate Your Monthly Payments

There are many ways you can budget your monthly expenses. If you are currently struggling to monitor your expenses each month, here are the things you can do to properly budget your monthly payments.

List Your Monthly Expenses

The first thing you should do in budgeting your monthly payments is to acknowledge all your monthly expenses. Writing down all your expenses will give you a clearer picture of your monthly spending.

Make sure to include all of your expenditures, even the small things you are spending every month. When you create a list, make sure to put the corresponding amount you allocate for each item.

Your list should include the following:

  • Groceries
  • Transportation cost
  • Clothing
  • Household items
  • Health Care
  • Personal Care
  • Pet care for those individuals who own a pet
  • Entertainment
  • Savings
  • Dining Out

By making a list, you can see how much you spend each month. You will also see where your money went. Variable expenses tend to fluctuate from time to time, making it tricky to allocate a specific budget for them.

List Your Monthly Utility Bills

You should also list all your monthly bills. Aside from expenses, utility bills also come every month. In making a list, you must only include regular monthly bills and those with fixed amounts.

Example of regular monthly bills are:

  • Mortgage or Rent
  • Electricity
  • Water
  • Internet
  • Phone
  • Credit Card
  • Loan
  • Insurance
  • Cable
  • Subscriptions and Memberships
  • Tax

This is a list of all the monthly bills of an average American. Essentially, this is also what your list will look like.
income vs expenses how to budget

Compare Your Income and Expenses

Recognize how much money is coming into you every month and compare it to your spending. The salary schedule per individual may vary. It is possible to receive payment weekly, bi-weekly, or monthly, and the manner in which you are paid affects how you budget your expenses.

If you are paid monthly, you will have to design your budget and payment schedule accordingly. Ensure that you can stretch your salary from the first day you got your pay up to the 30th day.

If you are paid twice a month, you have to prioritize the bills that are due closer to your first payment. Then the remaining bills will be settled on your second pay. You will also need to divide your expenses into two and prioritize those you needed most.

Identify Essential And Non-Essential Expenses

Identifying essential and non-essential expenses will help you make the right decision when you plan to cut down on your expenses. First, You have to know which items or bills fall under essential expenses.

Essential expenses are required for you to survive, such as grocery, utilities, tax, and transportation. You should also need to include your loan payments and health care. Non-essential expenses are extra spendings you made aside from your necessities.

You can decide which expenditures you consider as essential or non-essential. Things like dining-out, pet care, and entertainment. As long as you prioritize the things you need to survive and drop the things that are not necessary.
types of expenses budget101

Four Types Of Expenses

To further analyze your expenses, let us also discuss the four types of expenses you might have. By identifying each type of cost you have, you can create better and more accurate budgeting plans.

Fixed Expenses

Do you recall the mention of regular monthly bills earlier? Those bills fall under the fixed expense. These expenses happen regularly every month, on the same day, and with the same amount.

Fixed expenses need not necessarily occur on a monthly basis. They can occur on a weekly basis as well. Examples of fixed expenses that occur weekly are house cleaners, daycare payments, and dog walking services. As long as the payment happens regularly with the set schedule and amount, it is considered fixed expenses.

The best way to cut down on your fixed expenses is to look closely at every bill you receive. Some people signed up for supposed to be free online services and forgot to cancel them, so they are now billed monthly for their subscription.

Also, look for things that you do not need and scratch them out on your expenses. You will be surprised how many of these items you can get rid of, and you will see a significant reduction in your monthly fixed expenses.

Recurring Expenses

A recurring expense is commonly known to be our day-to-day expenses. These are the expenditures we made that happen throughout the month. These expenses are unpredictable, unlike with our fixed expenses.

A recurring expense has a different date and amount every time. Be reminded that recurring expenses do happen every month, which is why it is best to consider them when doing your budget. Examples of this type of expenses are already mentioned earlier.

Recurring expenses can be monitored if you stop using credit cards in paying them. If you encounter recurring expenses, it is best to pay them in cash to monitor how much you spend on these types of expenses every month.

Non-Recurring Expenses

Non-recurring expenses are those that do not happen regularly. These expenses may occur once or several times a year. There is no fixed date and amount for non-recurring expenses (aka annual expenses), making it very hard to include in your monthly budget.

Examples of non-recurring expenses are clothing, shoes, and vehicle registration fees. Even taxes are considered as a non-recurring expense. Since there are various non-recurring expenses every year, it is important that you limit your spending on these expenses.

Non-recurring expenses are not easy to manage. Thus, anticipate the possibilities ahead of time for you to plan it and allocate a certain amount for any non-recurring expenses that might happen for that specific month.

Whammy Expenses

Whammy expenses are the most unpredictable of all. You do not know when these kinds of expenses happen or how much it will cost. It is the most frustrating expense out of all the expenses you will encounter. Some examples of whammy expenses are whenever your car breaks down, and you need to bring it to the professionals.

Another example is when your house incurs some damages like a leaking roof or a busted door. You will need to spend money to be able to fix it. These kinds of expenses are also considered emergency expenses that will come to you unexpectedly.

Whammy expenses can not be budgeted as they are very difficult to forecast. However, you can use your emergency funds for whammy expenses, as this is also categorized as emergency expenses.
whammy expense

How To Calculate Your Monthly Payments

You should know how to calculate your monthly payments, including loans and other expenses. Calculating the monthly payments on your loans and expenses will help you determine how much money you ought to allocate to these payments.

You can do your calculations manually, but trust me, it is so confusing, and it will only stress you out. Today, we are so lucky to have enjoyed the ease modern technology has provided us. You can use online calculators to calculate your monthly expenditure.

You will only require plugging in the numbers and voilà! You will receive the answer instantly without having to solve any equations. Loan calculators are available online, and most online lenders provide a payment calculator on their website.

How Important Is Budgeting?

Knowing how important budgeting is may inspire you in starting to plan and create a budget. Budget is important in managing your finances as it allows you to ensure you will have enough money to cover all your needs. You would not need to continuously worry about not having enough money to meet your needs.

Following a strict budget will also allow you to save and help you avoid debts altogether. If you are currently on loan, a budget will help you escape the endless cycle of debts. If you want to achieve financial freedom, budgeting would be your first step.

Cut down all unnecessary expenses and stick to a strict budget every month. If your salary does not permit you to have the luxury, you need to cut them off as it will not do you any good. Luxury is only for people who are earning more than what they need.

If you are an average earner, do not dream of including luxury into your monthly budget. Always prioritize the things you need to live. If you become successful in your budgeting, you will eventually achieve financial freedom and afford the luxury items you want.


We always heard about budgeting, but we don’t have a single idea of doing it properly. You may try, but you might eventually fail because you are not doing it correctly. All the given information would be sufficient to help you jump start your proper monthly budgeting journey.

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