Details

1. Add Essential Expenses: Go to your Budget Planner dashboard (available to logged in users) and use a calculator to add up all expenses that are truly “Essential” (see below for guidance). Don’t forget to include some portion of “Essential” expenses that occur less than once a month.
2. Add Net Income: Next, add up all your net income. “Net income” is the money you actually receive after taxes and other deductions are taken out. Just like with expenses, you may want to include some portion of income that you receive less frequently than monthly.
3. Review the Difference: If your Essential Expenses is greater than your total “Net Income”, you’ll need to find ways to increase your income or reduce your expenses by at least the difference of these two numbers.

Now, let’s take a closer look at what to include in “Essential Expenses” and “Income.”

Typical Essential Expenses

• Housing – typically rent or mortgage
• Food – just the essentials. Ideally this is a bit more than rice, beans, and ramen but it certainly shouldn’t include fancy cocktails or expensive meals on the town if those could be supplemented with lower-cost options or forgone entirely.
• Utilities – at a minimum this will include electricity, heating, water but you may also want to include a cell phone bill and internet service.
• Transportation – gasoline, public transit costs (including monthly passes) and insurance (if you drive your own vehicle).
• Debt – including the minimum amount due to all loans and credit cards. Note: The minimum amount due on a credit card is typically a percentage of the total balance and can therefore fluctuate. If you have outstanding credit card debt consider transferring this to a single card and having a different card that you pay off in full every month. Then, only include the outstanding credit card debt payment in your “Essential Debt Expenses” (all other essential expenses – regardless of how they are charged and paid for – should fall into one of the previously mentioned categories).
• Childcare – If you have a child, and you need childcare to be able to do your job and earn income, this is an essential expense.
• Savings* – includes any money you take from your income and dedicate to saving. While not truly “essential”, and also not typically thought of as an “expense”, by including this as an essential expense, it can help you to build an emergency fund.

Net Income Sources

• Job Income – often comes in the form of a paycheck that – depending on your job and the consistency of hours – may be of a fairly regular amount.
• Tips – depending on your job this could be a significant and fairly predictable source of net income.
• Side Gig – could include babysitting, dog walking, or anything that brings in income not from a regular source. Often this income may be irregular in amount and frequency so you’ll want to take the average based on typical low and high amounts (MoneySwell calculates this for you in Budget Planner).
  

  Dog walking is a common side gig for many. Some even turn dog walking into a full time occupation!

• Government Income – this could come from SNAP, Social Security, TANF, SSI, a pension etc.
• Support Income – could include support from parents or other sources who may send you money either regularly or irregularly.
• Investment Income – could also include interest or dividend earnings from savings accounts or investments.
• Savings* – if you are planning to draw money from your savings, consider how much you want to draw in total, and divide that by the number of months you plan to draw it. For example if you are able and willing to draw $2,000 from your savings, and you need it to last four months, you have $2000 / 4 = $500 a month of “income.”

Conclusion

Now that you know your essential expenses and your net income, you can compare the two. If your net income is greater than your essential expenses, you support yourself! If not, you’ll need to find ways to increase your income or reduce your expenses as discussed in other tasks in this plan.

Details

We get it: Tracking expenses is annoying. Most people can’t stick with “tracking every dollar” for the long haul. That’s why in the task to set up your Budget Planner dashboard, we described three different methods for tracking your spending:

1. Track spending by account
2. Tracking spending by category
3. A mix of account and category tracking
   

Many people start out tracking by category to get a sense of where they spend their money and then once they feel like they have a good handle on this they move to looking at total expenditures by account. It’s much easier to update and track just one spending number per account per month than to track every single category of spending.

Our recommendation is to try one method for two months and if it doesn’t work for you for whatever reason, try another method. 

Tracking by Account

As previously stated in an earlier task:

1. Look at the “Total Purchases” line on your monthly account statements. 
2. Compare a few month’s worth of statements to get a good estimate of your low and high spending numbers. Or, you can calculate your average number between statements and enter that average number in both fields.
3. Do steps one and two for each credit card and all checking accounts you regularly use.

Tracking by Category

Review the categories below and add your low and high estimates in for any that apply to you. If you don’t have any idea what you spend, many credit card and checking accounts have a section on the site that will break down your spending by category so take a look at that if you need help.

Essentials (yours may differ)

If you have trouble tracking your spending by category, we highly recommend tracking by total account spending instead.

• Auto insurance
• Car payment
• Cell phone bill
• Child care
• Electricity and natural gas
• Gasoline
• Groceries, toiletries and other essentials
• Health insurance (only if this comes out of your net income)
• Homeowners or renters insurance
• Internet payment
• Life insurance
• Medical costs
• Mortgage/rent
• Pet-related expenses
• Property tax (if not already included in the mortgage payment)
• Public transportation
• Sanitation/garbage
• Water

Extras (yours may differ)

• Alcohol
• Cable or TV streaming services
• Clothing, jewelry, etc.
• Dining out
• Gym or club memberships
• Home furnishings
• Movie, concert and event tickets
• Streaming music service
• Travel expenses (airline tickets, hotels, rental cars, etc.)

Obligations & Responsibilities (yours may differ)

• Child support or alimony payments
• Credit card payments
• Extra payments on mortgage or student loans
• Individual after-tax retirement account (e.g. Roth IRA)
• Other loan payments
• Student loan payments
• Other investments

Conclusion

That’s it! You now have a plan set up for tracking your monthly expenses. If you track by account, you should be able to track your budget in about ten minutes per month. If you track by category, it will take you a bit longer but you’ll have a granular view of precisely where your money is going.

Self Sufficiency Starts Here

Learning how to manage your own finances and become financially self-sufficient is no easy task. And yet, it’s a task that virtually everyone wants to reach. How do you do it? It all comes down to balancing your expenses with your income.

So, how can understanding the costs of your “basic needs” be helpful? First, it can help you understand the difference between your current expenses, and your possible expenses if you were forced to make some changes. 

Secondly, by determining your minimum expenses, you can also determine the income you’ll need to support yourself.

Defining “Financial Sufficiency”

Meeting basic needs is about sufficiency. While you get to decide precisely what “sufficient” means, it shouldn’t be glamorous. It doesn’t include vacations to Mexico, multiple streaming TV services, buying the latest electronics, or a $500 a month clothing budget. Put differently, vacations are extra, you don’t need a streaming TV service, a free cell phone with a basic plan is fine, and most of the clothes you already own are probably good enough.

The categories below are typical “Basic Needs” categories. For each category consider what your costs are (or what they could be). Then, think about all the things that are not on the list. Remember: The goal of this exercise is to define the floor of your expenses. You may decide you want a lifestyle that goes beyond the basics. But by completing this exercise you’ll know the minimum you need to survive.

Basic Financial Needs Categories

• Shelter
  • Mortgage or rent
  • Utilities (heat, water, electricity, internet)
• Food
  • Groceries
  • Some eating out or on the go food if essential
• Transportation
  • Public transit
  • Car (gas, insurance, maintenance)
• Personal Essentials
  • Phone plan
  • Toiletries
  • Medications (if applicable)
  • Health Insurance – if you don’t have it yet we’ll cover how to get it in the Security tier. But if you’re going to buy it on your own (as opposed to through an employer), you’ll want to factor this in.
• Professional Essentials
  • Anything you need to regularly pay for to be able to continue earning income
• Other Financial Obligations
  • Minimum debt payments

Take Action

1. In the “Plan” tab of Budget Planner, scroll to the “Spending” section and add each category from above. Alternatively simply choose or create the spending categories are right for you.
   

   An example of accounting for your basic costs using MoneySwell.

2. Add a value for each category. If your monthly cost is variable, enter a low and high value (MoneySwell will take the average). If it is a fixed cost, enter the same number in both the high and low fields. 
3. Lastly, record the total of these costs in the notes section above (available for logged in users) for future reference (since you’ll likely be adding additional items in Budget Goals after this).

Note: Even if you end up creating a plan in Budget Planner that tracks by account (a method we really like) instead of by category, there’s a lot of value in going through the exercise of tracking your basic expenses by category at least one time.