To create a budget, determine the amount of your monthly take-home pay and calculate the percentage of your net income you can devote to different spending categories. Budgets should be tweaked to address your specific financial situation. However, considering recommended guidelines can help to begin planning a personal budget. If you overspend in one or more categories, you have to reduce spending in other categories to avoid financial troubles.
Your mortgage or rent should not exceed 35 percent of you net income, according to financial adviser and author Dave Ramsey. You should combine your mortgage, rent, real estate taxes and home owner’s insurance when determining your monthly budget amount. For example, if your monthly take-home pay is $6,000, your combined housing expense should be $2,100 or less.
The amount you spend for groceries and dining out should be no more than 15 percent of your monthly net income, according to Kiplinger editor Janet Bodnar. Therefore, if you earn $6,000 per month, your monthly food expense should be no more than $900. For many people, food budgets are the most difficult to maintain because of impulse shopping and rising prices. To control food expenses, you can plan weekly menus, use coupons and limit dining at restaurants.
All household utilities should account for no more than 10 percent of your take-home pay, Bodnar says. If you earn $6,000 per month, you should try to keep your utility expenses below $600. Utilities include electricity, landline phones, cell phones, cable TV, satellite TV, water and natural gas.
Transportation expenses include car payments, car insurance, gas and car maintenance. These expenses should be limited to 15 percent of your monthly net income, according to Ramsey. If you bring home $6,000 per month, you could potentially spend $900 per month for transportation expenses, if necessary.
While up to 75 percent of your income typically goes toward basic living expenses, the other 25 percent is divided among other miscellaneous expenses. Bodnar recommends that you plan to spend about 10 percent on debt payments and no more than 5 percent on clothing and 5 percent on entertainment. Try to carve out room in the budget to save at least 10 percent of your monthly take-home pay.