ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

4 Steps to Budget your Paycheck Effectively: When Do You Use My Income Advice? Start With How Much Money You Have Today!

Updated on March 21, 2013

Why budget your paycheck today?

It is important to manage your money. It helps you meet your monthly financial obligations on time. Managing your finances also help increase your capability to save for your retirement, education funds or by simply having extra sitting in the bank.

Budgeting your paycheck is an art. It is designing and planning the future of your wealth. "Your financial plan is showing you the direction of your finances and will help you maneuver within your means." - by the girls. The money that you own and can spend anytime is what you will be able to include in your budget. There are many ways to do your budget but I will show you the 4-steps on how to do budgeting effectively.

The 4-steps to budget your paycheck effectively:

  1. Know how much is your paycheck, after tax deduction
  2. Identify your fixed expenses
  3. Identify your variable expenses
  4. Monitoring and Strategy

Making a financial plan can be seen by many as a balancing act. These four steps on how to budget your paycheck will also help you design your safety nets while walking in a tight money rope. It will allow you to plan in advance if you need additional sources of income or if you need to make a temporary loan to make ends meet.

Without a written budget, you have a very high chance of overspending your money and not knowing what are the consequences that lies ahead. This is what we are trying to avoid here. We know that the effects of overspending or being cash strapped places a heavy toll in our health, wealth and relationships.

Step 1: How much money do you bring home?

You need to know how much income you earn in a weekly, bi-weekly or monthly basis. Knowing how much is your paycheck, after deducting taxes, is the first step in creating your budget.

If you have been earning for a period of time, you already have a fair idea of your average income. To the person who just got its first paycheck, your take home pay is the gross salary minus the federal and state taxes that are deducted from it. Your federal tax rate ranges from 15%-35%, depending on your income tax bracket. Your state tax deduction rate also depends on which state you live in.

Step 2: Identify Your Fixed Expenses

Fixed expenses are your monthly financial obligations that you need to pay on a consistent basis, whether you like them or not. Regardless of your financial activity, fixed expenses are awaiting payment from you every single month.

This means that even if you lose your job or your income, you are still obligated to pay them. During the recent economic recession, when millions of jobs were lost, the way of life of many Americans were affected drastically. Many could not afford to meet their ordinary fixed expenses anymore.

Suggested Examples of Fixed Expense:

  • House Rental or Mortgage - This is the monthly payment to your landlord or mortgagee
  • Car payment - It refers to your your monthly car amortization to your lender
  • Insurance - It includes insurance on your car, health, life and property
  • Electricity Bill - This is the electric power you use normally around your house. It includes the appliances, furniture and electronic gadgets you use at home
  • Water and Gas Bill
  • Telephone and Cellphone Bill
  • Cable and Internet
  • Medical and Prescriptions Costs - Your monthly medical needs that your doctor has prescribed for you.
  • School expenses, tuition fees and books - Yourself and/or your dependent's K-12 and college school fees, supplies and books.
  • Grocery - Your food and basic household supplies.
  • Gas - This expense is a vital part of your car amortization expense. It cannot run without gas.

Fixed expenses are mostly fixed in dollar value on a month-to-month basis.This is not usually affected significantly even if your income increases or decreases at the end of your pay period.

Author's local trips:

Historic site: a 200-year old facade structure
Historic site: a 200-year old facade structure | Source
A  tourist spot:  wind mill by the Danes
A tourist spot: wind mill by the Danes | Source
Summer vacation at the beach
Summer vacation at the beach | Source

Step 3: Identify Your Variable Expenses

Variable expenses are your expenses that you have full control. This type of bills are your spending habits that you can probably live with or without for a period of time.

Simply put, your controllable expenses are expenses that you can decide based on your wants and not on your basic needs. As brandrocker states, this behavior is also related with your happiness, passion, and impulse. You are likely to spend more during an emotional outbreak - both on its high and low end.

Your variable expenses is directly related to your income. As your paycheck increases, your variable expenses increases along with it. The same is true if your salary decreases, your controllable expenses will decrease too.

Suggested Examples of Variable Expense:

  • Vacation Expenses - It includes the local and non-local trips you plan to go by yourself, with friends or with your family.
  • Eating out - This are your eating out expenses from dining in at fast foods all the way to fancy restaurants. This category also includes your daily Starbucks coffee and the likes.
  • Recreational activities - Your trips to the park, mall, movies, and others.
  • Upgrades on your cable, telephone, cell phone, computer that can have alternatives - You should be able to determine if your upgrades is necessary or not. If it is beyond ordinary and necessary, then your additional costs on the added features of your cable, telephone, cell phone and computer will be classified as a variable expense.
  • Shopping expenses i.e clothes, shoes, etc.
  • Credit card payment - Your monthly credit card payment can range from the required minimum amount to paying in full your outstanding balance for the month.
  • Money you put aside for your savings - Examples of your savings include the money in your bank (savings account), retirement plans like 401(k), investments in stocks and bonds or time deposits (CD).

A word of advise on the use of your credit cards: this available revolving credit privilege you have should help you cover necessary expenses between pay dates or allows you to earn those reward points. Don't use your credit card if you cannot afford to pay it back on time.

Budget for March
Actual Expenses for March
Did I make it?
1) March 15 paycheck $2000
2) Fixed Expenses: -Rent $1500
Rent $1500
Fixed Expense-Grocery $300
Grocery 310
3) Variable Exp - Recreation $100
Recreation $150
Varibale Exp-Money for Savings $100
Money for Savings $ 0
Variable Ex-Eating at Restaurant $150
Eating at Restaurant $100
b4) Monitor result - my paycheck is not enough by ($150)
will i work overtime or borrow money?

Step 4: Monitoring and Strategy

Now it's time to make the computations on your budget. First, subtract your fixed expenses from your paycheck. The difference between your paycheck and fixed expenses will be the money available to pay for your variable expenses.

Next, you deduct your variable expenses. The difference from deducting your fixed and variable expenses from your income will either be a positive or negative number. A positive number will tell you that you have extra money to save or spend. A negative difference will tell you that you are in trouble.

Budget Example:

Paycheck $2000

Less: Fixed Expenses $1800

Difference $ 200

Less:Variable Expense 350

Shortage on paycheck ($ 150) based on budget

The concept of breaking down your expenses is to emphasize the fact that if your salary or paycheck cannot pay all your fixed and variable expenses, there is data available for you to analyze your spending pattern. You will be able to identify specifically which part of your budget is doing okay and which part has gone wrong.

You have two immediate options to solve your budget shortage or lack of money thereof. The first option is to increase your income or salary by the amount you need. Increasing your income is usually the first choice that you will make. This way, it doesn't affect the dollar value you have placed on your budget's fixed and variable expenses.

Strategies to increase your income:

  • Work overtime
  • Get a second or third job
  • Have a part-time work
  • Put up a garage sale
  • Start up a small business at home that you are passionate about. Adjust your schedule so that you can work on it at night, during weekends or on your free time.
  • Turn your hobby into an income generating activity. Usually, your hobby is your craft that you really enjoy doing and is good at it.

The second option is to reduce, constrict, eliminate or sacrifice your Variable Expenses. You can use the trial-and-error approach, adding or subtracting dollar amounts from one controllable expense to another until you arrive at your desired result. The bills you identified as variable expenses are the ones that you can manipulate to make your budget work.

Tips to manage your Variable Expenses:

  • Bundle your cable, television and telephone lines to get the cheaper upgrades for the services. Most of the these companies have business ties with each other that they offer cheap bundled products. Be aware that their promotion runs for 12 or 24 months only and you need to renew them to keep on paying the promotional rates.
  • Decide on your vacation plans based on three factors: Affordability, Worth and Priority
  1. Affordability - The question is, can you afford this vacation? Have you been saving up for this trip? Don't sacrifice your basic needs for a lavish activity that you cannot afford to pay.
  2. Worth - Is the trip worth it? Don't rely on what you read on the advertisements for your vacation destinations. Do your own extensive research before making your decision.
  3. Priority - Do you have to go on vacation now, or next year, or the year after next? Which of the many vacation plans you have should you do first? Your trips should not have a negative effect in your financial health when you come back home.
  • Plan recreational activities inside somebody's house. Getting together with friends and family to spend weekends in a house is cheaper than somewhere else.

Your budget does not have a mind of its own. You have to constantly check your actual expenses versus your budget. Monitoring your expenses ensures that your money is on the right track.

"“The way to stop financial “joy-riding” is to arrest the chauffeur, not the automobile.” - Woodrow Wilson"

Suggested tutorial video using excel spreadsheet. Uploaded by freeutubetutorials on Jun 25, 2008

Tools you can use in making your budget

Below are suggested tools to help you make your budget processing and recording easier:

  • Use the Microsoft Excel or spreadsheet -this is a very useful tool to record your income and expenses with speed and accuracy.
  • Use your cellphone to access your budget file and update it anytime, anywhere. Aside from accessing your Facebook, Twitter, email, etc, from your cellphone frequently, take advantage of the technology available to you to access your budget records too.
  • If you are recording your budget and actual expenses manually, using the good old notebook or diary, have a ready calculator on hand The calculator will give you accurate addition and subtraction totals.

Good Luck!

Your budget is your brainchild. To be effective, I strongly recommend to follow the 4-steps beginning from Step 1; knowing how much money you bring home. Some people will be tempted to start the budgeting process from step 2 or step 3. I don't encourage to start making your budget focusing on what you need rather than what you have. Do it the other way around. So my advise is, do not start your budget thinking ahead your expenses before acknowledging how much you earn.

I hope the 4-Steps to budget your paycheck effectively will help you achieve your goal. In 2012, the United States only ranks 4th as a financial literate country (

At first, tracking your expenses can be tedious. It will become easier as you get used to it. Move forward by setting aside 10-15 minutes daily to record your actual expenses and monitor your budget. By consistently doing this, a clear picture of your financial health will ultimately come into focus. You will be on your way achieving your financial target each passing day!

Start to create your budget with the money you have today. To reach your financial objective is a rewarding experience. If you have not designed your budget before, that is okay, Today is the right time to do it! Good luck!

Copyright © 2012 The Girls. All rights reserved. Reproduction in whole or in part in any form or medium without permission prohibited.



Submit a Comment
  • the girls profile imageAUTHOR

    Theresa Ventu 

    8 years ago from Los Angeles, California

    Good luck precy! Am sure you can do it very well :-)

  • precy anza profile image

    precy anza 

    8 years ago from USA

    I'm closely keeping an eye on my expenses right now as I'm saving for something And those are really helpful tips. :) Voted up and shared!

  • the girls profile imageAUTHOR

    Theresa Ventu 

    8 years ago from Los Angeles, California

    Thanks alocsin for dropping by! That would be great if you can automatically deduct from your paycheck an amount you want to set aside for personal reasons. Your accounting/payroll department is doing a great job accommodating employees' budgeting skills. I saw this once only and it was interesting to know the extra mile for the company books to be adjusted.

    As you suggested, you can also do it on your own. It takes a lot of discipline though not to be tempted to spend my paycheck on "unplanned things". Thanks for sharing :-)

  • alocsin profile image

    Aurelio Locsin 

    8 years ago from Orange County, CA

    Excellent advice. One suggestion for budgeting is to have different accounts for different categories of the budget, such as vacation, and to have the amounts automatically deducted from your paycheck and deposited in the accounts. Then, when the bill comes due, you already have the money set aside. Voting this Up and Useful.

  • Mandeeadair profile image


    9 years ago from California

    Fantastic advice!! Great hub.

  • the girls profile imageAUTHOR

    Theresa Ventu 

    9 years ago from Los Angeles, California

    It's a good start monicamelendez, the desire to set up a budget. Most fixed expenses are onerous with the house mortgage/rent and car amortization. Your $500 can approximately pay off the monthly utility bills and grocery. Good luck :-)

  • monicamelendez profile image


    9 years ago from Salt Lake City

    I really really need to set up a budget. I couldn't guess within $500 what my fixed expenses are! Not good!

  • Sethughes profile image


    9 years ago

    Great hub. Very helpful!

  • the girls profile imageAUTHOR

    Theresa Ventu 

    9 years ago from Los Angeles, California

    Thank you BlossomSB for being of help to you! There's also the necessary financial planning for post retirement. In case you need my advise, just send me a private message anytime and I'll send you helpful links :-)

  • BlossomSB profile image

    Bronwen Scott-Branagan 

    9 years ago from Victoria, Australia

    Thank you for visiting me. I came back and found this very interesting and helpful hub. Having worked, with time out for children, we always seemed to manage, but now I'm retired it's quite different and I find difficulty in managing - I guess because I now have time for travel, but having spent on that, now I really need to budget.

  • the girls profile imageAUTHOR

    Theresa Ventu 

    9 years ago from Los Angeles, California

    Thank you Tina! I agree, it's onerous to track down expenses. But if done consistently a few minutes a day, it will become easier 'cause you'll be able to figure out a good routine for it :-)

  • thougtforce profile image

    Christina Lornemark 

    9 years ago from Sweden

    It is easy to get more expenses than we can afford and without monitoring it will always be a surprise when the money is gone! I can not say that I like to spend time on a budget but it is necessary! Many good advices here and you explained how to do it in a great way that is easy to follow. I like your statement; "Your budget doesn't have a mind of its own"! So true, but without a budget it feels like it have:) Voted up, useful


  • the girls profile imageAUTHOR

    Theresa Ventu 

    9 years ago from Los Angeles, California

    Thanks alocsin for voting up and considered this useful! I purposely made the table clear, understandable and simple.

  • alocsin profile image

    Aurelio Locsin 

    9 years ago from Orange County, CA

    I think tracking is an important part of managing your expenses -- a lot of folks don't do it and then wonder why they don't have any money left over. Your table is a great example. Voting this Up and Useful.

  • the girls profile imageAUTHOR

    Theresa Ventu 

    9 years ago from Los Angeles, California

    Hi jpcmc! Congratulations to your wife for doing a great job handling your family's budget. Leaving money for your personal needs is correct. But as you said, two heads is always better the one and I perfectly agree :-)

  • jpcmc profile image

    JP Carlos 

    9 years ago from Quezon CIty, Phlippines

    I'm pathetic when it comes to financing. i leave it up to my wife. I simpy give her my pay then she gives me money. She's a whiz when it comes to buidgeting. But I do leave some for my own need/wants. I guess it's about time I actually be more involved. Thanks for the wake up call. :)

  • the girls profile imageAUTHOR

    Theresa Ventu 

    9 years ago from Los Angeles, California

    Brandrocker, I have embedded your comment in my article. (Check Step # 3)

  • brandrocker profile image


    9 years ago


    Thanks. And surely, most of us follow a pattern when it comes to shopping. :)

  • the girls profile imageAUTHOR

    Theresa Ventu 

    9 years ago from Los Angeles, California

    Hi Mialynboco! It's good to see you here on HP! With your vast experience is finance, health and many more, I know you can contribute a lot to the readers around the world too. Welcome and let me know if you need any help getting the best of hubpages :-)

  • mialynboco profile image


    9 years ago from Granada Hills, CA

    The advise of this article is what most of us need at this point in time. With a bad economy that has no immediate hope of getting better, I think we should all tighten our purse strings by segregating our expenses as fixed or variable. This way, we can identify which expenses we can do without and start saving - no matter how modest our income is. To "the girls" - thank you for this sound advice.

  • the girls profile imageAUTHOR

    Theresa Ventu 

    9 years ago from Los Angeles, California

    Thank you for stopping by brandrocker. I like your personal description on the variable expenses. Sounds very familiar to me :-)

  • brandrocker profile image


    9 years ago

    Nice hub. I just read this one. I liked the classification of fixed and variable expenses. Yup! The fixed ones are committed and you do not usually have much option to change them without planning. But you can put a tight curb on variable expenses. These are the spending related with happiness, passion, and impulse. You are likely to spend more during an emotional outbreak - both on its high and low end.

  • the girls profile imageAUTHOR

    Theresa Ventu 

    9 years ago from Los Angeles, California

    Thank you KDF! The $100 benchmark on your kids' bank account is a very good example of drawing the line between having money or getting broke soon. With your good financial discipline,they can just add zeroes in the future as they grow older and wiser.

    I teach my kids the same principle for bank overdraft fees- better give your $35 dollars to help the needy than to give it to the big banks which will care less for them at the end of the day.

  • KDF profile image


    9 years ago from Central Illinois

    Great tips. Well planned and thought out. I've always taught my kids to leave an emergency balance of $100 in there so basically when they show only $100 left in their account, they're broke! Seems to work, forget about paying some stupid bank for overdraft fees. voted up and useful

  • the girls profile imageAUTHOR

    Theresa Ventu 

    9 years ago from Los Angeles, California

    Hi Virg, setting aside money for your savings consistently is like winning the bingo every month! From your comment, I would say you have a good personal budget already in place and you are well-disciplined in managing it. Keep it up!

  • profile image


    9 years ago

    Savings is very basic and very practical to every individual who has income. Set aside 10% from your net income for your savings. After deducting the savings from your net income minus the expenses. If you have a left over of $10, wow! BINGO!!! We have to education ourselves on how to manage our own money rather than consulting a financial adviser. Keep blogging! Take care!

  • the girls profile imageAUTHOR

    Theresa Ventu 

    9 years ago from Los Angeles, California

    Thank you for your comment Rose I. I agree that it is hard to save money for rainy days. But once you start doing it, especially with the help of a good financial advisor, your savings can be managed well indeed.

  • profile image

    Rose I. 

    9 years ago

    This is a very helpful article. It makes sense to budget your paycheck otherwise you will end up with a negative balance in your account that could end up in a deficit on your budget and eventually bury you in debt. However, savings should be considered a fixed expense rather than variable. Putting money aside for the rainy days is hard for many but it is very doable. There are several options that one can have to save money for the future. Consulting a financial advisor should be a first step because they can offer advice on how to manage your money. It might be hard but it is doable. Kudos to a very helpful and informative blog. Keep it coming!


This website uses cookies

As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at:

Show Details
HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
LoginThis is necessary to sign in to the HubPages Service.
Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
AkismetThis is used to detect comment spam. (Privacy Policy)
HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
MavenThis supports the Maven widget and search functionality. (Privacy Policy)
Google AdSenseThis is an ad network. (Privacy Policy)
Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
Index ExchangeThis is an ad network. (Privacy Policy)
SovrnThis is an ad network. (Privacy Policy)
Facebook AdsThis is an ad network. (Privacy Policy)
Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
AppNexusThis is an ad network. (Privacy Policy)
OpenxThis is an ad network. (Privacy Policy)
Rubicon ProjectThis is an ad network. (Privacy Policy)
TripleLiftThis is an ad network. (Privacy Policy)
Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)
ClickscoThis is a data management platform studying reader behavior (Privacy Policy)