Those on a fixed salary can determine how many times they get paid per month and multiply that number by their net paycheck amount to determine their total monthly income. For example, if you get a bi-weekly paycheck, then you receive two paychecks per month. If your net paycheck after taxes is $1,250, then your total monthly income would be $2,500 ($1,250 x 2 = $2,500). If you are paid bi-weekly, this means you receive 26 paychecks per year, or two extra, because two months of the year have will have three paydays. Be aware which months include this additional payday. If you are paid semi-monthly, you will receive two paychecks per month, regardless of the length of the month, resulting in 24 paychecks per year. If you get paid hourly or your income is irregular for any reason, then look at the last six to 12 months of paychecks. Figure out the average you earn per month. For example, suppose over the past six months you earned $2,500, $3,000, $2,000. $1,800, $3,200, and $2,700. Add these amounts together to get the total ($15,200). Divide the total by 6 to get the average monthly salary ($15,200 / 6 = $2,533 per month).
If you are not sure how much you spend each month on some of these items, then track your expenses for a few weeks.
You may not be able to make adjustments on some of your line items. Some expenses, such as your rent or mortgage, may be fixed and cannot change in the short-term. However, chances are that you will be able to find many other areas where you can reduce your spending. For example, many people begin by looking at how much they’re spending on food and plan to eat out fewer times per month. Plan to pay down debt. If you can reduce your expenses for groceries, cable, cell phones and clothing enough, you can divert some of those funds towards paying down your credit card debts. Plan to save as much as possible. Also, you should definitely plan to save up a rainy day fund of at least a few thousand dollars. Having this money put aside will allow you to pay for unexpected expenses as they come up without having to use your credit cards and incur more debt.
Using these assumptions, the average cost of take-out or restaurant meal for a family of four is $52 ($13 x 4 = $52), and the average cost of meal cooked at home for a family of four is $16 ($4 x 4 = $16). So, the weekly savings from cooking two meals at home would $72 ($52 - $16 = $36; $36 x 2 = $72). By cooking at home two times more per week, a family of four could save as much as $288 per month on food ($72 x 4 weeks = $288).
Avoid bottled water. It would be less expensive to purchase reusable water bottles and fill them with filtered water. [10] X Research source Canned, frozen and prepared foods cost more per unit than fresh meats and vegetables. [11] X Research source
Use cash instead of credit. While it may be more convenient to use plastic for all your purchases, using a credit card can also encourage overspending. [13] X Research source People tend to buy and spend more than they want to when they are using a card, because it’s convenient and it can make it difficult to keep track of how much you’ve really spent. [14] X Research source Carry just as much cash as you’re willing to spend on a purchase. This will stop you from impulse buying, since you’ll be very conscious of the fact that you have to go to the ATM to get more of your hard-earned dough to buy that item or upgrade you probably don’t need. [15] X Research source Impose waiting periods on purchases over a certain dollar limit or within certain categories. Tell yourself that you have to wait five days, two weeks or one month before making purchases that are more than $50 and are not for necessities like food. [16] X Research source When you see something that you think you just have to have but it is not a necessity, take a picture of it and hang it on the refrigerator with today’s date on it. If you still want it after your waiting period has expired, then make a plan to purchase the item. [17] X Research source Think in terms of hours instead of dollars. As yourself how many hours you would have to work to pay for that $50 item. [18] X Research source Avoid shopping trips to the mall and visits to your favorite online retailers. Don’t put yourself in the path of temptation. [19] X Research source
Some communities have deregulated natural gas service in addition to electricity. Investigate your options for natural gas providers in your area. Know the terms of your current contract. Understanding these terms will enable you to compare with other companies. Look over your bill. Know how much you pay per kWh, whether it is a fixed or variable rate, and when your current contract expires. [24] X Research source
Set up auto transfers to pay your bills on time. Request checking account alerts to avoid overdrafts. Get rid of overdraft protection. If your bank won’t authorize payments that overdraw your account, then you can completely avoid overdraft fees.
Controlling impulse spending will help you to use credit cards more wisely. Learning how to manage credit, how to strategically pay down balances and how to maximize rewards can reduce your monthly expenses.
In this example, if you make $3,500 per month, then your debt-to-income ratio equals 20 percent ($3,500 x . 2 = $700). If you make less than this per month, then your debt is too high, and you need to reduce your debt before making any more debt purchases.
