It can be hard to figure out where your money is going each month, and it can be even harder to plan your spending so you can prepare for the unexpected and can use your money wisely.
What Is a Budget Calculator and Why Use One?
A budget calculator, put simply, is a tool to help you accurately track your past spending and plan your future expenses. Setting up a budget and sticking to it is one of the best financial habits you can have. If you make a lot of small purchases throughout a month, it's very hard to have a clear picture of how big the total of those little purchases can be. A few dollars each day for your favorite coffee might not seem like a lot, but by putting those figures into a monthly budget, you may change your mind when you see over a hundred dollars in coffees each month, for example. An online budget calculator is a quick and easy way to help you analyze your spending and plan your future expenses.
Tips for Using a Budget Calculator
- List Everything - To start your budget planning, you'll need to make a complete list of what you spend. This includes necessities like rent or mortgage payments, transportation expenses like car payments, gas, car insurance, or a subway pass, and, of course, food, utilities, childcare, necessary loan payments, debts, and other costs. It also includes the non-essentials you enjoy spending money on like eating out, a streaming service subscription, or a vacation. A great way to figure this out is to keep a small notebook with you or use a note-keeping app and make an entry every time you spend anything, no matter how small. Many online budget calculators will even provide you with a list and some categories of expenses to fill in to get started.
- Don't Forget about Less Frequent Expenses - If you're trying to make a list of all of your spending in May or June, it's easy to forget about expenses that might come during only part of the year. Utility bills may fluctuate with the changing seasons, or you might walk or bike to work less during the winter. You may have annual memberships or subscriptions that you pay only once a year, or you may need to remember about back-to-school expenses for the fall.
- Include All Income - As important as it is to make sure you track all of your spending, an accurate budget also requires careful consideration of all income. Many of us have some income in addition to our regular paychecks, even if it's infrequent. You might sell some things online or in a consignment shop, or you might take on some freelance work, a side job for a delivery service, or provide some paid childcare.
- Wants vs. Needs - Few of us would question housing, transportation, food, and basic utilities as necessities. Most of us would also agree that things like a vacation, latest model of smartphone, or a new wardrobe are not essential spending. The waters are muddied, though, once you start to consider things like internet service, cable TV, or dinner out once in a while. When you're planning a budget, do your best to really be honest with yourself about whether something is truly necessary or just something you like and have become accustomed to having. Some online budget calculators can help you categorize these expenses, and some will divide your income into recommended percentages for needs, wants, and debt payments/savings.
- Savings - When you carefully examine where your money is being spent, you can almost always find places to cut back. It might be fewer coffees or lunches out, or switching to a cheaper cable plan, or walking more often than driving or taking a bus or the subway. Each of those small savings adds up. A budget can help you find those places to save a little. A two-dollar savings each day of the year will net you $730 at the end of the year. It doesn't feel like spending much when it's a couple of bucks, but if you had to spend over 700 at once it would feel like a big hit. Tiny changes add up and bigger changes add up even faster.
- Goals - Making hard choices about where to cut expenses can be easier when you have the big picture, and that big picture is easiest to see with a clear budget. Having that budget and making those choices can also be easier if you have some great goals in mind. Getting out of debt and relieving yourself of that burden sounds wonderful, but it's hard to imagine and work toward consistently. Use areas of your budget where you make difficult cutbacks as goals for reaching debt-reduction or savings plateaus. A concrete goal and reward can make it easier to have spending restrictions in the present.
Why Use a Budget Calculator?
Creating a realistic budget can feel a bit shocking when you see where your money truly is going. It can also be a comforting tool, helping you be better prepared financially, so you can worry a little less. Of course, unexpected expenses arise, but most of the time, creating and following an accurate, realistic budget can keep your finances predictable. A budget calculating tool makes it much easier to gather up the numbers you need and see how it can all work together.