How Do I Calculate Average Monthly Expenses? 7 Facts

Whether you’re building a new monthly budget or updating an existing one, you’ve likely noticed how crucial (and challenging) it is to get your monthly costs properly. Underestimating or overlooking one cost might throw off your whole spending plan.

What Does a Calculate Average Monthly Expenses Mean?

The average monthly expenditures of a person, family, or corporation are the sum total of all monthly expenditures.

Anyone concerned with saving, growing, overspending, or changing spending habits may build a more realistic budget by knowing the typical monthly costs. There are various simple methods for calculating monthly average costs.

How Do I Calculate Average Monthly Expenses?

How Do I Calculate Average Monthly Expenses?

Locating all bank statements and expenditure data from the last year is possibly the most exhaustive method for calculating monthly average costs.

This may be simple for a person with a single bank account, but it can get complicated if the individual has numerous accounts or uses credit cards regularly.

To get the average, sum the amount of money spent over a period of 12 months, then divide by 12. This provides a monthly expenditure average.

A more basic concept of spending is keeping track of expenses for only one month. Add this figure to a spreadsheet, list, or budgeting application each time a purchase or withdrawal is made from a bank account. Include payments that are paid automatically, such as credit cards, utilities, and rent.

If a person understands that his or her spending patterns are consistent from month to month, this can provide a reasonably accurate estimate of monthly costs.

When employing a one-month monitoring method, be mindful of any deviations that may occur in the month under review. For example, in December, many people’s spending tends to increase because of holiday travel, presents, and other once-a-year expenses.

Consider monitoring for two or three months to gain a more accurate picture of your average expenditures.

Before establishing a precise calculation of average monthly costs, it may be prudent, according to some experts, to generate an estimate.

How Do I Calculate Average Monthly Expenses?

Divide costs into basic categories, including rent, bills, transportation, entertainment, health care, clothes, and food. Try to predict how much money is spent every month in each area.

Household Budget Basics

A budget enables you to regulate your spending in relation to your earnings. In addition to allowing you to see how much you’re spending in other areas, budgeting enables you to track your expenditure.

There are two reasons why having a budget is essential. It helps you live within your means, first and foremost. Second, establishing a budget allows you to be better prepared for future developments.

Let’s discuss frugality. Each dollar of your revenue should ideally be accounted for in your monthly budget. In a sense, this is living paycheck to paycheck. But this is a positive form of living paycheck to paycheck.

You “pay yourself” by increasing your emergency fund and investing for retirement, you pay your expenses (including any outstanding debts), and then you may spend what’s left. Regularly reevaluating your budget can help you examine where your money is going and how close you are to reaching your financial objectives.

Budget Planner

The creation of a zero-based budget is a common method for people and corporations to get started. With a budget based on zero, everything is on the table and there should be no leftover funds.

Start by keeping track of your monthly expenses. Also, keep track of your monthly income, or the amount of money you bring home every month.

Spending more than your income? You need to reduce your expenditures. Do your earnings exceed your expenses? You could save and invest more if you had the means.

Because month-to-month costs change, some budget extremists may create a fresh spending plan each month.

You may, for instance, budget for gifts in December and travel in the summer. Others divide the annual cost of all gifts and vacations by 12 months to obtain an annual average.

Here are the major categories of expenditures you will likely wish to include in your budget:

Childcare

If you are responsible for a bundle of joy (or several bundles of joy), your budget will need to be adjusted accordingly.

How Do I Calculate Average Monthly Expenses?

Your daycare charges will vary based on your situation. Your spouse or a relative may be caring for your children, or you may be employing a nanny. Do you choose public or private school?

Medical

You may have heard that medical expenditures are increasing in the United States. Whether your company contributes to the cost of your health insurance premiums or you pay for them on your own, you definitely incur at least one medical bill each year.

Even a reasonably low deductible might still strain your finances. It is therefore prudent to include a certain amount for medical bills in your budget.

Housing

Current median American rent is equivalent to 30.2% of median American income. This indicates that millions of individuals are already rent-burdened (they spend more than 30 percent of their income on rent) or are on the verge of being rent-burdened.

Our budget calculator provides a breakdown of the budgets of people who reside in the same area as you. If this number is greater than 30 percent, it indicates that your neighbors are struggling to keep up with housing expenses.

If you are a homeowner, your housing expenses will include your mortgage payment and any necessary house repairs.

Food

Americans now devote a lesser proportion of their money to food than they did in past decades. The USDA reports that the portion of the average American’s income spent on food has decreased from 17.5 percent in 1960 to around 10 percent now. In addition, we spend less on food than other industrialized nations.

Due to Food Network, food photographs on social media, and the adoption of the word “foodie,” it may appear as though we’ve gotten more food-obsessed, but we’re really spending less of each paycheck on food.

However, we’re spending more of that money on meals outside the home, which (as we all know) may strain a person’s finances.

Transportation

One in twenty Americans travel to work through public transit. A small number of us walk or ride bikes, but the majority of us drive. That includes repairs, insurance, and petrol. Depending on your location, you may also be required to pay for parking and tolls.

Transportation is a burden on the budgets of many Americans due to its tight connection to job security. If you have an unreliable vehicle, it is likely that you cannot be a trustworthy employee, hence reducing the security of your employment.

Unanticipated automobile costs are one of the primary reasons why it’s essential to have an emergency fund.

Other

Even the most thrifty of us spend money on a variety of non-essential products. Included in this category are toothpaste and soap, clothing, washing, and school materials for children as the basic minimum.

How Do I Calculate Average Monthly Expenses?

If you have greater economic flexibility, you may allocate dollars to entertainment and presents, vacation, and dining out.

Saving

Our retirement calculator will help you determine how much you should be saving each month for retirement. On the other hand, the SmartAsset budget calculator reveals how the typical individual in your area is saving.

If you are saving at a higher rate than your local peers, you should not stop now. The American savings rate is infamously low. Our savings calculator can show you how your savings will increase and how the interest rate of your accounts will influence that growth.

Taxes

Obviously, taxes reduce your take-home salary and budgetary flexibility. If you are a regular employee, taxes are likely deducted from your paychecks. This may appear to be bad news, but it might really make it easier for you to budget.

If you’re a freelancer or contractor, it’s crucial to budget for your tax payments each month so you don’t receive a hefty bill around tax time that you’re unprepared to pay.

How to Create a Monthly Budget

When you’re ready to get started, creating a monthly budget requires 4 basic steps:

Step 1. Calculate your income

Beginning with your monthly net income In other words, determine how much you take home each month after taxes and other deductions. Once you know how much you receive each month, you will be able to determine how much you can spend.

Step 2. List all your expenses

Then, compose a list of your monthly costs. This covers requirements, such as your power bill and food, desires, such as streaming TV subscriptions and takeout, and even planned saves, such as monthly 401(k) payments or an emergency fund.

Also include quarterly, semiannual, and annual payments, such as some insurance plans and property taxes.

Step 3. Subtract your expenses from your income

Subtract your monthly income from your monthly expenditures. This indicates how much discretionary spending money you will have remaining after all your budgeted costs.

Consider utilizing a portion of it to pay off debt more quickly or to add to your savings, and spend the remainder as you like!

How Do I Calculate Average Monthly Expenses?

It’s a good thing you opted to create a budget if your spending exceed your income! Examine each of your costs to determine where you may be able to save money, from little adjustments such as eating in more often to larger ones such as relocating or finding a roommate to split living expenses.

Step 4. Create and track your budget on a monthly basis

Now that you have a monthly budgeting strategy, you must adhere to it. Begin by selecting how you will monitor your expenditure.

If you choose to monitor everything manually, whether on paper or in a spreadsheet, you will need to record all of your daily transactions in each area, from paying your bills to purchasing a cappuccino on the way to work.

Creating a monthly spreadsheet and keeping it up-to-date is a lot of effort, but it’s a crucial step toward gaining financial control.

Budget Wisely For Average Monthly Expenses

Budgeting is vital to organizing your finances and achieving your financial objectives. However, it might be difficult to determine if you are spending too much or too little in some areas.

Comparing your monthly spending to the national average might give benchmarks for assessing your financial situation. For instance, if you are not saving enough, it may motivate you to identify areas where you may reduce spending to save more.

Analyze how you might utilize the information to better your home budget as you consider the average monthly costs for your leading spending categories.

Budgeting for Your Future

Once you have a realistic budget, you will realize how important it is for future planning. You will, for example, have an emergency reserve and retirement funds. In addition, if required, you will be able to make place in your budget.

Consider that you spend a considerable amount on dining out, vacation, and clothing. If it is within your budget and you have paid your bills and yourself, go for it.

What if anything changes in the future? Suppose you wish to move to a place with a higher cost of living or accept a dream job that pays less than your present salary.

How Do I Calculate Average Monthly Expenses?

You can examine your budget to determine where reasonable cuts can be made. Perhaps you are prepared to reduce non-essential spending if it would help you achieve another objective. If you do not have a budget, you will not be able to determine how much you can afford to cut.

Conclusion

You should calculate your monthly expenses before you start investing in your dream house. Doing so can help you save money for future purchases and help you make a smart investment decision.

You may be surprised at what you can do with just $100 per month if it makes up for half your total debt, and the other half pays for your down payment.

You should calculate your monthly expenses before you start investing in your dream house. Doing so can help you save money for future purchases and help you make a smart investment decision.

FAQ

To get the average, add up the amount of money spent for 12 consecutive months, then divide by 12. This will give an average of how much has been spent per month.

Average monthly expenses per household: $5,111. The average expenses per month for one consumer unit in 2020 was $5,111. That means the average spending per year is $61,334. Keep in mind that living cost varies by region — some cities are very affordable, while others are extremely expensive.

We can calculate the average cost by dividing the total cost by the total output quantity. Average Cost equals the per-unit cost of production which is calculated by dividing the total cost by the total output. Total cost means the sum of all costs, including the fixed and variable costs.

How to calculate monthly averages
  1. =AVERAGEIFS(
  2. numeric data range,
  3. date range,
  4. “>=” & first day of month,
  5. date range,
  6. “<=” & EOMONTH(
  7. first day of month,
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Pat Moriarty
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