Let me ask you this question. Do you frequently see financial experts and accountants talking about how important it is to calculate your monthly expenses?
Of course, you do. And that’s for a very good reason too.
We often tend to spend our money on things we don’t even need without even thinking twice. For example, have you ever bought an extra cloth even when you don’t need it just because it was on sale? If yes, then you get the idea.
And to control this cost, you need to calculate your monthly expenses and see where you’re actually spilling your money to.
In this article, you’re going to discover 3 steps to calculate your overall monthly expenses. So, let’s dive in.
Pile Up All The Financial Statements And Bills
First thing first, you need to pile up all your financial statements and bills from the previous month. This includes electricity bills, cell phone bills, rent, mortgage, loans, grocery, literally everything. You need to gather any bill or financial statements that reflect where you actually spent your money.
The reason is pretty simple. If you don’t know where you’re spending your money, you can’t calculate your total monthly expenses. So, don’t be lazy and pile up all the bills. This will be really helpful and save you time later on.
Create A List Of Expenses
After you gather up all your bills from the previous month, it’s time to create a list. Create a list that includes all your expenses. The list should have your recurring expenses like electricity bills, grocery, mortgage, rent, a loan payment, etc.
Also, don’t forget to count the other superficial expenses like a new haircut, a night out, and probably a romantic date with your partner or spouse. Yes, you need to count that in too.
List all the expenses and then move to the next stage, which is evaluating your monthly expense.
Now, Evaluate Your Expenses: The Most Important Part To Calculate Your Monthly Expenses
Now, this is the most important stage. This is where you’ll actually calculate your monthly expenses. So, you need to be careful at this stage.
The main focus of this stage is to find a pattern of your overall expenses. Ideally, you should create a worksheet where you’ll add all your purchases. Now, you need to put each purchase and expenses into different categories. There are three basic categories you can put all your expenses:
- Fixed: This kind of expense is usually fixed and will remain fixed every month unless you make some big changes in life. These include your rent, mortgage, electricity, insurance premium and more.
- Flexible: Although these kinds of monthly expenses are necessary, you can still change them or cut costs on them by changing your lifestyle or certain habits. These include grocery, cell phone bill, using more coupons, etc.
- Optional: Expenses that are not necessary but you still spend money on them falls under this category. And this is where you can actually save hundreds of bucks every single month. These include your trip to Starbucks on the way to your office, movie or theater tickets, date, dining out, etc.
By doing this, you can easily calculate your monthly expenses and control where you’re spending your hard-earned cash.