08/30/2026
In the coming Ember months rolling into the new year we will be examine important principles Authored by Cary Siegel
One of the principles is "DEVELOP A WRITTEN BUDGET AND EVALUATE IT EVERY SINGLE MONTH
At first, it may be painful to do this. However, once you
develop a monthly budget, it’s extremely easy to track and
analyze.
The principle behind having a monthly budget is simple:
each month, more money must come in than goes out.
There is no alternative; you can’t spend more than you
make. I know this is contrary to how our government and
most Americans manage their finances. However, if you
adhere to the budgeting process explained (and shown)
over the next few pages, you will become financially secure
over time.
The simple act of developing, tracking, and analyzing
your monthly budget will result in sound fiscal management.
So, let’s break the process into these three parts:
1. Develop a budget—List all your expenses and all
your income, and account for them in your budget.
2. Track your budget—The first day of every month,
summarize your performance against last month’s
budget, and prepare this month’s budget. Once you next to no time at all to manage.
3. Analyze your budget—Look at your budget and
see where you are doing well and where you’re not.
Make the necessary changes that allow you to save
more money.
In order to understand budgeting better, let’s look at the
first step, developing a budget.
To develop a budget, you need to estimate (1) what is going
in your pocket (income) and (2) what is coming out of your
pocket (expenses) every month.
Let’s look at what is going in your pocket:
1. Salary and Wages —Look at the after-tax dollars in your
paycheck.
2. Bonus and commissions—If you are eligible to
receive this, it will have to be an estimate (in after tax
dollars). I usually don’t include it and end up
saving the “surprise” income.
3. Dividends and interest—Estimate this based on
your prior year’s investment history.
4. Gifts—You usually receive these only on birthdays
and holidays (and they go away as you get older).
Now, let’s estimate what is coming out of your pocket.
5. Other includes Royalties, Business profits, Corporation Dividends, Draws and Distributions, Fees, agreeable compensations, and reimbursements
Major expense categories include the following:
1. Housing—Mortgage or rent is usually your biggest
expense. However, you can’t forget property tax,
insurance, and estimated maintenance/repairs.
Renting will usually eliminate some of those
expenses.
2. Utilities—It’s amazing how many “support
services” are needed to run your house. Electric,
gas, water, garbage, cable, Internet, and phone
services are the major utility expenses.
3. Automobile—Until you can purchase your car with
cash, your major automobile expense will be your
car payment. However, you will also need to include
insurance, gas, parking, maintenance, and repairs.
If you’re smart, you will also start a fund that
enables you to purchase your next car with cash.
4. Food—The two major expense categories here are
groceries and restaurants.
5. Entertainment—My example includes movies,
sports, clubs, vacations, electronics, and cell phone
service. This works for the individual in my
example, but you definitely need to personalize this
area for yourself (depending on your personal
entertainment habits).
6. Miscellaneous—Here, I lump together any items I
didn’t account for in other categories. Include
expenses like gifts, supplies, and toiletries, but
personalize this category based on your own habits.
7. Other insurance—This is where you need to
account for health and life insurance payments. I
used this category as a catchall for health care
expenses, so I include physicians, dentists,
optometrists, prescriptions, and any other health
care-related expenses I have.
8. Other loans—In addition to loans included in
other categories (home and car), you may have
student loans or credit card debt. Include both of
these in this category.
9. Charity—It’s nice to have this one broken out. It
makes you think about giving not only money but
also time to various charities.
10. Savings—You need to have this in your budget,
even if it’s $0 when you first start out. This is one of
the main reasons you are budgeting: to find a way
to save money every month.
11. 401K fund—If a 401K is available with your
employer, this is another forced savings method
you need to use. We will discuss this in a later
lesson (see principle 58).
12. Emergency fund—Do you have money in case of
an emergency? You need to. We’ll also discuss this
in a later lesson.
Learn more from Cary Siegel , the author of Why Didn't They Teach Me This in School? 99 Money Management Principles to Live By
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