Making A Budget You Can Live With

Gas prices are soaring and that is expected to impact the cost of just about everything else we buy from food to clothing. With businesses and industries cutting their costs, most people’s annual raises barely keep up with the rising cost of living. What can you do to make sure you live within your means? You can start by making a realistic budget, one that you can live with.


List all your sources of income, but only list them if they are dependable. eBay sales, money from your annual garage sale and wages earned from overtime work are extra. They should not be relied upon to make your budget work as they are not dependable forms of income since there is no guarantee that you will sell and collect the same amount week after week. List income from jobs, child support, rental income and any source of income that you know will continue regularly. This is what you have to work with.

Basic Expenses

Here is where you will define the basic expenses you have to spend just to survive. Include your rent or mortgage payment, utilities such as water, electricity, telephone, heat, internet service and trash pick-up. A rule of thumb is that your housing costs should be about 36% of your net income. Add your allotment for groceries. Many financial advisers will suggest this should not exceed 12% of your take home pay. Also include any insurance premiums you pay out of pocket, targeting about 5% of your net pay for this expense.

Other Expenses

If you have an automobile loan, it should, ideally, not exceed 12% of your earnings. This includes gasoline and maintenance costs. Other loans such as student loans or personal loans fall into this category as well and should not exceed 5% of your income. Child care expenses such as day care should not surpass 6% of your income. Clothing and medical/dental expenses should each total 5% of your pay.

The Remainder

With the remaining 14% of your income, you should be able to save some money and still have some left for entertainment. If you have credit card debt, you will want to apply any extra money you have each month to paying off that debt. Once credit card debt is eliminated, work toward paying off personal loans, and car loans. If you are spending more on any of these categories than recommended, consider ways to bring the costs down. This could mean trading your car or home for a more affordable one. The less you owe, the more you will be able to save and the easier it will be to handle the increasing cost of living.