Note: This term is used to describe items that must be considered each month, not items that either can be “postponed” or that may be one-time, or nonrecurring, expenses. While some amounts can vary widely from month-to-month, it is a simple task to figure out an average monthly payment. Add your total payments for a four-month period, divide by four; this is your average monthly expense.
- Transportation (gas & basic maintenance [tune-ups] for cars; bus/train fares, etc.)
- Utilities (power, water, etc.)
- Phone (local, long-distance)
- Insurance (life, auto, homeowne>Is, etc.)
- Credit card repayments
- Other loan repayments (car, dgaartment store, personal loan, student loan, etc.)
- Property taxes
- Personal income tax (usually deducted from your salary but if not, as with self-employed persons, must be figured)
- School tuition/books/etc.
- Retirement plans (including plans where monies are taken out automatically, such as 401K, IRA, pensions, etc.)
- Medical plans (fixed amounts deducted from salaries or individual payment plans, not including co-payments, out-of-pocket expenses, etc.)
- Alimony/child support payments
- New car
- New furniture
- Entertainment (movies, books, music, restaurants, etc.)
- Club memberships
- Charitable contributions
- Elective medical procedures
- Net income from salary (income after all deductions have been taken)
Some financial advisors use gross income.
Most feel it is more realistic to plan around what is actually at hand.
- Dividends & interest
- Bonuses (where, as noted above, these can be reasonably relied upon)
- Social Security
- Alimony/child support received
- Income from sources outside of basic salary
Note: The items below can be postponed during times when expenses may exceed income.
- Distributions from businesses
- Freelance work
- Royalties, etc.
Add up the above, subtract the sum from your Fixed Expenses. The “overage” is the amount you can save for Varying Expenses. If there is no overage, if there is a shortfall, or if you want a greater overage for other purchases/expenses, then you must make changes to make your budget.