How To Control Spending With A Simple Budget

Ultimately, our goal should be to reduce costs, spend smarter, save more for investing in what we value. Or to keep for an emergency fund in the event you work for the federal government and there is a government shutdown.

Liquid net worth is what really matters. It is a far more realistic reflection of your financial condition should you face an immediate need for money such as a medical crisis or a business opportunity.

Begin A Budget To Accomplish Your Financial Goals The list of reasons for preparing a simple budget outweighs the plan for not starting one. You need a place to understand what you are spending and saving to accomplish your financial goals.

Before we build a simple worksheet, try to understand your significant categories as a percentage of monthly aftertax income or take-home pay plus other income rather than monthly gross income which is not the real place to start.

Your monthly net income should only include that income that is steady and predictable streams rather than one-time events.

Household fixed costs

Fixed costs are usually periodic, predictable, and often contractual. They are primarily inflexible payments like rent, mortgage, car loans, insurance. You can reduce these amounts through refinancing or negotiating rent. You may have to change apartments as your rent is usually set at monthly payments.

Household variable costs

Variable costs are more flexible and often associated with personal and discretionary spending such as furniture and furnishings, entertainment, vacations, medical, education, and personal care.

Savings Pay yourself first with any savings by putting some dollars into a 401K plan. Better yet, automate amounts via direct deposit from your paycheck. You can also have some flexibility if you can reduce monthly expenses. Saving is an important part of your lives and it is recommended that 5%-10% of net income goes to savings.


Shelter or housing is the largest cost factor for the average person. These costs are mortgage costs or rent, insurance, property taxes, furniture. Your goal for housing as a percentage should be between 25%-35% of your after-tax income.

Having a good idea of your most important monthly expenses should lead you to establish your emergency fund. An emergency fund is what it says, cash funds for emergencies put aside in an account separate from your savings account.

If you don’t have an emergency fund yet, I recommend you start to put this money aside to cover the essential costs you will have to pay no matter what your circumstances are. Expenses such as food, mortgage, rent, utilities, medical, car, and pets require such a fund.  You need to save at least six months of payments, but if you can manage saving eight months, that’s great.

Preparing a  budget is a means to an end. It can provide discipline to help achieve financial goals. We only need to be reminded that many people remain out of work now or the more than 10% unemployment rate at the peak of the 2008-2009 financial crisis.

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