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Creating a Personal Budget

Step 1: Estimate Your Monthly Income

Enter your monthly income before any taxes or other deductions are taken out... This is your  Monthly Gross Income. You can get this figure a few different ways:

  • Gross monthly income = Gross annual salary divided by 12 (months) ... example $52,000 divided by 12 = $4,333
  • Gross monthly income = (Your hourly pay rate X number of hours worked per week X 52) divided by 12... example ($25 per hour X 40 hours per week  X 52 weeks)  divided by 12 = $4,333
  • If you're not working but still want to practice creating a personal budget, just enter $4,333
  • This will give you Your Monthly After-Tax Income

NOTE: Federal and MA State Taxes are estimates based on a $4,333 monthly gross income. Rates will vary based on your monthly income.

Monthly Gross Income
Federal Taxes
MA State Taxes
Total Taxes
Social Security (6.20%)
Medicare (1.45%)
Total FICA
Estimated Monthly After Tax Income

Step 2: Allocate Your Monthly Savings

Look at the 20% Savings Goal (which is 20% of your monthly after-tax  income) and decide how you want to allocate all of it so that it shows a $0 Balance when you're done with this section. Here's a few suggestions:

  • We highly recommend putting some funds into your Emergency Fund each month until you have 3-6 months of expenses in that fund. 
  • Each month you should be setting aside some money for Retirement. Learn more about employer/employee contributions and matches.
  • One good use for Short Term savings is for those bills that come due either twice a year or annually. Other uses could include first and last month's rent and a security deposit for an apartment; Christmas presents, vacations, or a car.
Savings Emergency Fund
Minimum of 3 months of expenses
Retirement
Money you won't touch until retirement
Short Term
Money you'll spend 6 months to 3 years out
Long Term
Money you won't touch for more than 3 years
Total Savings 20% Savings Goal
Balance

Step 3: Enter all of your Monthly Expenses

Look at the 80% Expenses Goal below (which is 80% of your after-tax monthly income)  and enter your expenses or anticipated expenses so that it shows a $0 Balance when you're done with this section. Again, if you're a student and/or not working, feel free to use the national averages.

  • If at all possible, experts recommend that you try to keep your total housing and utilities expenses to about 30% of your monthly expenses. 
  • Miscellaneous expenses might include child care, pet care, entertainment, gym fees, clothes, etc.

Note: As you use the Income, Savings and Expenses sections, you'll see that some of the line items have links that can provide additional information. 

Housing Rent
Mortgage / Property Taxes
Insurance (Renters or Homeowners)
Utilities Electricity
National average $120 per month
Gas / Propane
National average $100 per month
Phone
Internet Services
National average $100 per month
Cable TV Services
National average $210 per month
Streaming Services
National average $48 per month
Water
Trash Services
Transportation Auto (car loan)
Auto (insurance)
Auto (gas, parking, tolls, other)
Bus / Train
Food / Supplies Groceries
National average $300 per month per person
Restaurants
Supplies
Insurance Medical
National average $400 per month for individual
Other
Other Debt Student loan
Credit Card
Other
Charity
Miscellaneous
Total Expenses 80% Expenses Goal
Balance

Remember, this is just an exercise to see how you can manage your (future) income to best meet your personal/family goals.

A QUICK NOTE ABOUT BORROWING AND CREDIT SCORES: At some point, most of us will borrow money. It could be for a car, education, a home, or even a new business. You should know your CREDIT SCORE, how credit rating agencies calculate it and how banks and others use it to determine your ability to repay the loan. Learn more about credit scores.