Budgeting Calculator & Formula

Budgeting Calculator

Budgeting Formula

The budgeting calculator uses the following formula to help you understand your monthly budget and savings potential:

Total Expenses: Sum of Housing, Food, Transportation, Savings, and Other Expenses

Remaining Balance: Income – Total Expenses

Explanation

Understanding your monthly expenses in relation to your income is critical for effective budgeting. By categorizing your expenses and subtracting them from your income, this calculator shows your remaining balance, which can guide your spending and savings goals.

Real-Life Example

For example, if your monthly income is $4,000 and you have the following expenses:

Housing: $1,200
Food: $500
Transportation: $300
Savings: $600
Other: $400

Step 1: Calculate total expenses = 1200 + 500 + 300 + 600 + 400 = $3,000

Step 2: Remaining Balance = Income – Total Expenses = 4000 – 3000 = $1,000

This remaining balance represents funds available for additional savings or discretionary spending.

Benchmark Indicators

Recommended budgeting benchmarks:

Housing: 25% – 30% of income

Food: 10% – 15% of income

Savings: At least 10% – 20% of income

Frequently Asked Questions

What is a budget?

A budget is a plan for managing income and expenses, helping you track spending and achieve financial goals.

How much should I allocate to savings?

Aiming to save 10-20% of your income is generally recommended, but this may vary based on personal goals.

What percentage of my income should go towards housing?

Housing costs should ideally be no more than 25-30% of your income.

How can this calculator help with budgeting?

This calculator provides a quick summary of your income versus expenses, making it easier to see how much you can save or where you may need to cut back.