Monitoring a budget for correct spending is essential to control spending. Tracking budget performance is more effective using percentages instead of dollars. This is because dollar figures cannot yield the relative impact of spending unless context is provided to illustrate how spending relates to the whole budget. Converting dollars into percentages yields this context, keeping the budget on track. For example, $1,200 is spent from a budget for transportation costs, the dollar amount itself says nothing about its relationship with the budget. However, if transportation costs account for 65 percent, then a better understanding is achieved of how money is spent and relates to the budget, overall.
Add up the total for each budget category. For example, within the transportation category budgeted is a car payment for $250, insurance for $75, maintenance for $50, and a gas allowance for $150. $250 plus $75 plus $150 plus $50 equals $525. The total budget for the transportation category is $525.
Determine which sub-category the expense belongs. For example, an oil change qualifies as maintenance.
Divide the amount spent by the total amount budgeted for the sub-category. For example, an oil change costs $30. The sub-category budgeted for maintenance is $50. Dividing $30 by $50 equals .6 or 60 percent of the budget.
Repeat dividing the amount spent by the level of category in the budget to determine broader impacts on budget spending. For example, the oil change spent 60 percent of the maintenance budget. However, it needs to be determined how much the oil change affected the total transportation budget. Divide $30 by $525 to get .06 or 6 percent.
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