Creating A Personal Budget
Step 3: Expenses

The most exciting part of creating a personal budget is dealing with those expenses and spending. Why?

Because this is where you have the most control over your money.

You can't give yourself a pay raise (although there are some ways you can increase your income.)

But, you can eliminate expenses, reduce expenses, speed up debt repayment, increase savings, increase investments...you get the picture.

Expenses Defined

What does saving and investing have to do with creating a personal budget?

Let's introduce a new definition for expenses. Most people think expenses are bills. That's true. All bills are expenses.

But if you're using zero based budgeting (which we recommend), an "expense" is really anything you spend your money on. Every dollar you bring home has to go somewhere (you already know a nice chunk goes towards taxes and possibly health insurance premiums before you even get your take-home pay).

So, when you're creating a presonal budget our way, you want to include take-home income dollars used for saving and investing as part of your "expenses". Your goal is to always end up with a "zero" at the bottom-line of your budget.

(Yes, you do want a surplus while you're making a family budget...after you subtract bills from income. Then you allocate the surplus to wealth-building goals like saving and investing, ending up with an overall zero balance when completely done.)

Fixed Expenses

Let's get started.

Begin with your fixed expenses.