If you hope to create an accurate budget, you will need to know how to accurate calculate your expenses. The good news is that doing so is as easy as knowing what qualifies as an expense and how to use a calculator. Let’s take a look at how you can calculate your expenses and give yourself an accurate assessment of how much you owe every month or every year.
What Qualifies As an Expense?
An expense is anything that causes you to give money to another person or entity. They can either be labeled as a one-time payment or a recurring expense. For instance, paying $100 for tickets to a baseball game is considered a one-time expense because you aren’t liable for making it again in the future.
However, your car payment or credit card payment is considered a recurring expense because you make them for several months or years. As they are long-term expenses, they may be more difficult to eliminate compared to expenses that you only have to deal with on an infrequent basis.
How Do Calculate Your Expenses?
There are two ways that you can keep track of your expenses, and they may both come in handy for managing your finances in the short and long-term. The first method is to keep track of your total debt balance. This is the principal balance of your credit card debt, car debt and any other payments that you owe to creditors.
The other option is to keep track of your expenses based on what you owe on a monthly basis. For instance, you may owe $14,000 on the car that you just purchased, but you will only pay $200 a month to your lender. This can help you stay on top of your monthly minimum payments and make sure that you don’t fall behind, which could pose problems for your credit score.
Don’t Forget About Your Discretionary Purchases
It is easy to account for a car payment or rent payment because they are large payments that cover a major component of your life. They are also easy to account for because they stay the same each month. However, it may be more difficult to account for minor bills such as the cell phone bill or how much that you spend on food each week.
To make it easier to keep track of these expenditures, you may want to group them into a larger category called household expenses or entertainment. This ensures that you account for where that money is going and how it may impact your overall budget. If you run into tough financial times, you know where you can cut back on expenses without going without something important.
Knowing Your Debt Load Helps You Pay It
Knowing exactly how much you owe in a given month or a given year can help you make plans to pay for it. Typically, this means getting a job and using the wages earned from it to cover your costs. However, if you don’t have a job or encounter an unexpected expense, you may want to turn to a title loans Las Vegas company.
You can also get a title loan even if you don’t live in Las Vegas, which may entitle you to thousands of dollars in as little as 24 hours. You may also be able to use your home or the value of an investment portfolio as collateral for a loan. Rates and fees vary, but they should be considered an expense that needs to be accounted for until the entire balance is paid off.
It is important that you know where every dollar goes after you earn it. Assuming that you make more than what you spend, the excess should go toward an investment portfolio or toward an emergency fund that you can use to cover costs in the event of a job loss or other unique financial situation.
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