Successful investors and experts in personal wealth management such as Robert Kiyosaki and Tony Robbins always emphasize the importance of being financially literate. These experts believe that nowadays it is essential for each and every individual to be financially literate so that they are able to understand and manage their insurance, investments, savings, taxes, retirement, and their household budget. Sooner or later, everyone reaches the age when they suddenly have to be responsible for all of these elements of their personal finances. In that situation, many people often decide to just figure things out ‘later’ and plan everything ‘later’. And somehow, they rarely get around to it until they find themselves in tons of credit card debt, student loans, no savings and no job, or similar. If you are looking to avoid this common trap of growing up, then begin your financial literacy education right now. The Internet offers a wealth of information and tools that can help people do just that, for free. These resources include informative articles, video lessons, tips and tricks, etc. But probably the most powerful tool you can use is a free online monthly budget calculator.
Using a monthly budget calculator consistently is one of the most powerful things you can to improve your financial health. This tool helps you come face to face with your expenses vs. your income, but it also forces you to realize how much you are (or are not) saving and investing. Sure, this kind of calculation is probably in the back of your mind several times a week, but when you do a monthly budget in advance you are making a more conscious choice how to spend your money. That alone can be enough to focus your spending and turn things around, especially after you do it for a prolonged period of time. A Windows Excel-based monthly budget calculator is particularly convenient because you can save each month’s calculation very easily and hence you can track your expenditure, income, savings and other categories over time, and see how far you’ve come.
Why Calculate Your Budget Monthly
So let’s look into the details of budget calculators. A monthly budget calculator always includes three main categories – monthly expenses, monthly income and monthly savings – all of which have various subcategories. Under monthly expenses, the subcategories are usually food, housing, household expenses, health, clothing, transportation, personal expenses, loans and miscellaneous. This kind of decomposition allows you to realize just how much you are spending on each of these things every month. Then, if you find that you want to reduce your expenses, it will be apparent where you are spending too much and you can research savings strategies by category.
Under monthly income, the subcategories are monthly pay and other monthly income (such as alimony, child support, etc.). That should be easy enough to fill in. Under the category monthly savings, the three subcategories are emergency fund, savings, and retirement. Emergency fund? Probably you haven’t thought about it that much! But the advantages or having one are enormous. It gives you more flexibility in your career and an instant source of income in unforeseen situations, where you would otherwise have to turn to debt. And with the monthly budget calculator, you are much more likely to start one.
Some calculators also include annual expenses and annual income as separate categories to help you account for incomes/expenses that happen once or a few times a year, but not every month. Annual expenses which should be taken into consideration are things like taxes, vacation, car, tuition, homeowner’s insurance and similar. Annual income includes annual gifts and bonuses and tax return.
As you can see, a lot of items are included in the monthly budget calculator but their organization into subcategories makes it easy to fill in the blanks and calculate whether you are under or over budget. Also, it gives you a clear overview of the most important categories in a budget – total expenses, total savings, and total income. The best thing is that you can gain access to your monthly budget calculator anytime, anywhere, and for free! All it takes is the willingness to learn and the dedication to take control of your finances.