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Next, we look at are your expenses. An expense is anything that costs you money during the month. It can be anything from your phone bill, to rent, to that ice cream cone you just had to have.
It is always a good idea to keep a list of all of your regular expenses and when they need to be paid each month. Try creating your list starting with the items that get paid first in the month.
Rent – $500 – 1st of the month
Electricity – $75 – 10st of the month
Water – $50 – 15th of the month
Phone – $50 – 15th of the month
Credit Card – $200 – 20th of the month
Internet – $50 – 20th of the month
Total monthly expenses: $925.00
Expenses can get complicated when you take into account any late fees, bank fees, interest, etc. For now, we will keep it simple.
Now that we know our income and expenses we can figure out two things:
- Is it possible to pay all of our bills?
- How to make it happen.
For the first question, the employee plans to work her full 80 hours during the next two pay cycles.
$9.37/hour * 80 hours = $749.60 Gross pay = $599.68 Approximate net pay
$599.68 per pay cycle * 2 pay cycles = $1199.36
Our employee’s income for the next two pay cycles will be around $1200.00. Since the employee’s expenses will be around $925.00, it looks like yes, it is possible to pay all of the bills. Income from one month will more than likely need to be saved for the following month.
For the second question, timing is everything. Let’s say that the employee just got paid on the 30th of the previous month and is expected to get her following paychecks on the 9th and 23rd. (I mention the previous paycheck because it will be used to pay the rent for this month and there are no other expenses scheduled from the 30th through the 1st.)
Let’s take both the income and expenses and add them into a table with a running total line. The running total is calculated by taking the previous total and adding the next paycheck or subtracting the next expense.
Let’s take this one step further. The paycheck following the 23rd is scheduled for the 6th of the following month. Let’s extend this table to make sure there will be enough money to cover all expenses until the next paycheck by repeating our expenses.
Everything looks good. It is estimated that the employee will still have $337.20 after rent and before the next paycheck.
Note: You can make a table like the one above to organize your expenses.
Great and useful post. Like the way you broke it down and keep it simple. More people need to make a budget.
Budgeting is so important! I think people forget that so many times. It is necessary to sit down and figure out your reoccurring bills like you have shown.