A Beginners Guide to Calculate Your Regular Expenses

Figuring out your personal monthly cash flow is an key part of financial planning.  All of your normal expenses need to be included in your expense calculations, not just your non-discretionary expenses.  If you fail to include all of your common expenses, you will have a incorrect look at your overall financial picture.

Most everyone remembers to include expenses like housing, utilities, transportation and food when calculating their recurring monthly expenses.  These are basic necessities that are a part of life.  For most people, these items will represent the largest part of their overall monthly expenditures  Unfortunately, many people forget to consider other expenses as part of their financial picture.  This can create a very misleading picture of their finances.  Although many expenses are voluntary, they are an important part of your overall financial picture.

Some of these can be tricky because they are paid through automated billing, payroll deduction, or through periodic payments that do not appear every month. These can include cable television service, Internet access, various types of insurance, membership and subscriptions (such as with a gym or to a newspaper), and so on. Despite not always seeing these expenses every month, they are still there and should be taken into consideration. For example, assuming your Internet access or newspaper subscription is paid annually; if you do not intend to stop these services the annual payment should be divided by twelve and added to your regular monthly expense calculation.

Expenses that are irregular also need to be accounted for.  This includes things like home repair, clothing, vehicle maintenance and gifts.  The best way to get an estimate of these items is to look at the last few months and see how much you have spent on these items.  The longer period of time you can examine, the more accurate your estimate will be.

The last category of expenses we will discuss is entertainment expenses.  Entertainment is one of lives true pleasures, and some money for entertainment should be included in your budget, no matter how frugal you are.  Not including this will lead to a budget that you most likely can not stick to.  Most people spend a considerable sum for entertainment, for things like eating out, movies and the ever famous late.  While spending $15 a day doesn’t seem like much, not including it in your cash flow with through your calculations off by $450!  Depending on your income, this can spell catastrophe.

For an accurate picture of your personal cash flow, you must include all of your expenses in your figures.  If you fail to include non-essentials, like entertainment and things that are irregular, like home maintenance, you will not have created a useful picture of your cash flow.