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The following example illustrates how to create a personal budget using a two income family. Tim works for a transportation company and earns $3800 a month, after tax. Sally works part time as a receptionist and brings home $500 every two weeks, after tax. They have two children, one in school and one in daycare. They own one car, which Tim drives to work. Sally uses public transit to get to and from work. They have rent payments of $1200 a month and have a debt of $6500.

Even though they have different time intervals of their pay, they decide to use a monthly budget interval. However, each month they will need to calculate how much combined income they will get for the month as well as be aware of when they will receive it. This has the occasional advantage that Sally may get three paychecks in one month. For example, when Sally’s first paycheck falls on the 1st, her second paycheck will come on the 15th and a third paycheck will come on the 29th. This extra paycheck will be like a bonus for that month.

Their income is calculated as follows:

Income for Tim and Sally (Monthly)
Tim $3800.00
Sally — 8th of the month $500.00
Sally — 22nd of the month $500.00
Total Income: $4800.00

The following table shows all their expenses:

Expenses for Tim and Sally (Monthly)
Fixed time payments
1st Rent $1200.00
1st Internet $40.00
5th Car payment $260.00
6th Telephone $80.00
10th Cable $45.00
11th Car Insurance $210.00
15th Gym membership $75.00
20th Emergency Fund $50.00
25th Debt payoff $300.00
25th Retirement Savings $300.00
28th Transit pass $70.00
Irregular payment
  Food $900.00
  Gas $300.00
  Day care $400.00
  Childrens music classes $140.00
  Cleaning supplies $30.00
Total Planned Expenses: $4400.00

Note that the days are listed for when each fixed time payment is due. This is very convenient because you always know when a bill is due and how much money should be in the bank account on any given day. Even if you misplace a bill, you will remember that it has to be paid.

As you can see, their combined income more than covers their planned expenses. However, this extra money is often put towards unexpected or unplanned expenses. For example, in any given month, their child may have to pay for a field trip at school, the car may need some repairs, or Tim may buy lunch at work some days. The following table is an example of unexpected expenses that can occur in a month:

Unplanned Expenses
Purchased lunches $45.00
Car repairs $145.00
Hair cuts $40.00
Total Unplanned Expenses: $230.00

By looking at the above totals we get a clear picture of Tim and Sally’s financial situation. Their total monthly income is $4800 dollars and their total monthly expenses (for this month) work out to $4630 (found by adding their planned and unplanned expenses). After all expenses are paid, they have $170 left over. They can use this money for anything they want — paying down their debt, going out for dinner or a movie, or saving it for next month when they anticipate more expenses. This may not seem like a lot of money, but look at everything they have accomplished — they are covering all their expenses, they are paying down their debt, and they are saving for their retirement.

This example is also included in the free spreadsheet found on the Budget Tools page.

Related Pages

Why Budget
What Is Needed To Make A Budget
How To Budget
Calculate Income
Defining Expenses
Tracking Spending
Personal Budget Example
Personal Budget Tools
Budget Allocation Tool