How do I calculate average monthly expenses? (with photos)

Calculating average monthly expenses requires actual or estimated numbers for all monthly costs.

Average monthly expenses are the average of all expenses made by a person, family, or business in a month. Knowing your average monthly expenses helps set a realistic budget for anyone concerned about saving, expanding, overspending, or improving spending habits. There are several easy ways to calculate average monthly expenses.

Possibly the most comprehensive way to calculate average monthly expenses is to locate all bank statements and expense records for the last year. This can be easy for an individual operating with a single bank account, but can become more complex if the person has multiple accounts or uses credit cards frequently. To get the average, add the amount spent over 12 consecutive months and divide by 12. This will give you an average of how much was spent per month.

Calculating average monthly expenses usually starts with listing all of your living expenses.

A more general idea of ​​expenses involves just tracking expenses for a month. Each time a purchase or withdrawal is made from an account, add that number to a spreadsheet, written list, or budget software. Be sure to include self-paying accounts like credit cards, utilities, or rent. If a person knows that their spending habits generally do not vary from month to month, this can give a good idea of ​​their average monthly expenses.

Frequent use of multiple credit cards results in a more complex monthly budget.

If using the one-month tracking system, be aware of any variations that may occur in the specific month being examined. For example, in December, spending tends to be higher for many people due to vacation travel, gifts, and other annual expenses. Try to choose a month where there are no extraordinary activities planned, such as vacations or major holidays, or consider tracking for two or three months to get a clearer picture of an average expense.

See also  What is the relationship between business finance and accounting?

Some experts suggest that before making an accurate calculation of your average monthly expenses, it may be a good idea to estimate your expenses. Break down expenses into basic categories like rent, bills, transportation, entertainment, health, clothing, and groceries. Try to guess how much money is spent on each category per month. While some categories, like rent, are fairly easy to figure out, it’s interesting to compare a person’s conception of how much is being spent on entertainment or groceries with the actual numbers. Knowing what is under- or over-estimated can help you develop a realistic budget for the future.

Analyzing the data obtained through tracking and averaging will help you define a sustainable budget. Some experts recommend converting expense categories to a percentage of income to make adjustments easier. To do this, divide a category’s expense amount by the total monthly income amount and multiply by 100 to get the percentage. For example, if a person earns $1,800 US dollars (USD) a month and spends $450 a month on groceries, the income percentage would be (450/1800) x 100, or 25%. If that person wanted to increase their savings by 5% per month, this could be achieved by reducing their grocery budget by 5%, or $90 per month.

Leave a Comment