Ch. 03:

Ch. 03:
Make a List of Expenses and Put them in Categories


The next step that you must take if you want to create a beneficial budget is to make a list of all of your expenses and put them into categories. Just like when you were making your list of income, you must include all expenses no matter how small you may think they are. The small things add up after a while and before you know it they can overrule your budget.

This step may be a little bit more complicated than the previous one of listing your income. This is due to the fact that you will likely have many more forms or expenses than you will form on income. This will likely be a process that will take a bit of time to complete. It is important that while listing your expenses you are precise and take your time, cutting corners will almost surely lead to failure of your budget.

The following chapter will provide you with some tips and information that will make your experience with determining your expenses much less stressful and much easier.

What Are You Spending?

Now that you have determined what your exact monthly income is, it is time for you to begin figuring out what your monthly expenses are and to sort them into different categories. Sorting your expenses into different categories will help you with determining which expenses can be cut, we will go deeper into detail with this step in the chapter following this one.

No matter how difficult the process may be or how frustrated you get while doing it, it is important that you do this step. You must make sure that you are not spending more money on a monthly basis than you are bringing in. While making your list of expenses you will likely be shocked by the final number that you come up with. It is most likely much higher than it needs to be.

The following steps will serve as your guide through this process and make things much easier on you:

Figure Out What You Owe Each Month in Debt:
You need to determine what you spend each month on debts. This can include items such as car loans, title loans, credit cards, student loans, personal loans, and any other form of debt that you may have. This is extremely important to do if you want to get yourself out of a hole and better your financial situation. It is important to list down each item as well as total them all together.

Remember To Include Monthly Insurance Payments:
It is important to make sure that your things are protected in life but at the same time it also important to make sure that you have the money to pay for this protection. When you create your list of expenses you need to make sure to include all of your monthly insurance expenses. If you pay for your insurance quarterly or annually you need to divide the amount of your payment by the appropriate number so you can determine its monthly cost. Common forms of insurance people have is car insurance and homeowners insurance.

Calculate Your Monthly Utility Bills:
Utility bills must also be accounted for in your list of expenses. You cannot really figure out an exact number while doing this because your utility bills will be slightly different from month to month, especially during season changes. You need to figure out how much all of your utility bills were for the past three months and then calculate the average bill amount for those three months. Examples of utility bills are electricity, gas, and phone bills.

Figure Out What You Spend Each Month on Groceries:
We all need to eat so we all have grocery bills. As well, we all know how expensive groceries can be. Even generic brand items seem like they are getting more and more expensive every day. It is extremely important while listing the expenses that you remember to include your average monthly expenses for groceries. Just like with utilities, your monthly grocery expenses will likely differ so you cannot get an exact number but you can get an average. You may find that you need to switch to cheaper brands or lay off of some items for a while.

Remember Special Occasions:
While listing down all of your expenses it is important that you remember to factor in special occasions. Events such as birthdays or certain holidays can end up being quite expensive. When you make purchases for these occasions it is important that you keep the receipts so that it is easier for you to include these expenses in your list.

Study Your Previous Cash Withdrawals:
You need to make sure that you include all of your cash withdrawals that went to various different things. You need to look at your bank statement and figure out the number of your withdrawals and then list them down along with the reason the money was spent.

Once you have made this list it is time to move on to the next step in your journey. Continue reading to learn more valuable information.