Creating a Budget

Dear Dr. Per Cap,

I have no idea where to start to create a budget. It seems that before the month is over, I’m outta cash. More month than money! Can you help me keep track of my expenses?


Dear Unbalanced,

Definitely! Creating a budget is the way to go to get a handle on making your money last as long as your month. Creating a budget, however, can seem overwhelming. Getting started is the hardest part, but it gets easier with practice.

The first thing to do is figure out what your absolutely necessary or “required” monthly expenses are. These include things such as rent or mortgage payments, utility bills (electricity, gas, water service, phone service, etc.), food, medical expenses, child care, transportation or car payments, and insurance fees. You should also think about paying down debt and savings, so think about your credit card bills and what you can put into a savings account if possible. Since some bills vary widely month to month, a good way to come up with an “average” monthly figure is to add up the most recent 12 months of bills (your electric power bill, for example), and then divide it by 12.

List all of these monthly expenses on a sheet of paper, with a line for each type of expense. At the bottom of the column, total it all up. This is your basic monthly “nut” that you have to cover with your income.

Then also make a list of all your income sources over the course of a month.  Include your take-home pay and any other payments you may get each month (such as child support, per cap, alimony, disability payment, a second job, etc.).  Put these on a sheet of paper, too, and total them up.

Hopefully, when you compare the two totals, you’ll find that you have more income than you have in basic expenses. Any extra income is generally “discretionary,” which means it’s your choice how you spend the extra each month. It could go toward your savings account (which I highly recommend), or toward entertainment or other stuff you want for you or your family, such as clothes, furniture, a night on the town, etc.

If you find that you have more expenses than income, then you need to take some drastic steps.  The best approach is to see where you can cut some expenses, like eating out or going to the movies.  After all, the idea behind a budget is to make sure your expenses are less than your income. This allows you to start building up some savings and have more discretionary income to spend or save as you see fit.

If this is your case, take a hard look at where you spend your money – primarily your discretionary spending. Do you really need a double mocha latte at Starbucks every morning, or would a regular cup of coffee at home be just fine? Are you spending too much money on “impulse items” that you really don’t want or need? Do you truly need a famous brand item if a less-expensive generic item would be OK?  Are there ways to cut back on your basic expenses too? A better rate on your insurance policies or even your rent, perhaps, or can you substitute generic medicines for brand names?

Little expenses, over the course of a month, can really add up. Try to pay close attention to where you are spending your money, and always have the idea in your head that you want to cut or reduce unnecessary spending.  Get a handle on what your real “needs” are and take care of them first, before your simple “wants.” That will help you begin to get your expenses in line with your income.

One online resource that you can use to start budgeting can be found at this link:

Ask Dr. Per Cap is a program funded by First Nations Development Institute with assistance from the FINRA Investor Education Foundation. This content does not constitute professional and/or financial advice, and Dr. Per Cap is not a licensed investment advisor. To send a question to Dr. Per Cap, email