People often want to know how to calculate their living expenses to create a workable budget. There are plenty of formulas out there for allocating income. There are many factors that go into your cost of living that need to be taken into account - things like where you live and how much you make, or if you live on a variable income (commission) or a fixed income (salary or hourly type wages).

Often, what ‘you make’ is far different from the paycheck brought home. Taxes can eat a large amount of those wages, as well as other benefit deductions, health care, retirement, etc.

Budgeting is a personal process, unique to you and your circumstances, it is very emotionally driven. What is important to one family, may not be to another family. Considering identical income, neighborhood, etc. no one budget or plan will be identical.

Often the fewer categories to keep track of the easier it will be to follow through and keep within a budget. At times drilling down into a broad category to see the actual details will be helpful when changes need to be made.

For this reason, use a budget formula as a springboard or template to get started. Once you have an understanding of your expenses you can tweak the numbers to fit your personal needs and goals.

A budget formula can be as simple as 50/30/20

• 50% of your income going to all general or basic needs. This is easier than itemizing your separate bills and expenses. These are things like mortgage, utilities, groceries, transportation, medical, etc.

• 30% of your income going to creature comforts and fun things. These would be things like entertainment, eating out, hobbies, gym memberships, etc.

• 20% of your income going towards savings and an emergency fund.

You can use this as a guideline, ultimately you should aim to to live on much less than you take home.

If you really want to create financial security, switch the last two numbers, the 30% and the 20%. Save 30% and spend the 20% on the fun things. With this formula, your savings and investing will skyrocket. Your financial security will truly materialize much faster.

You will be blessed with the results of financial self discipline, which in today’s world, with so many places to spend money, you may create real wealth!

Once you map out where your money is going you can make decisions that allow you to save more. Saving should always be a priority - “pay yourself first” has become the leading advice for sound financial planning. Remember that financial success is directly related to the effort you put into it.

“Do not save what is left after spending; instead spend what is left after saving.”

- Warren Buffet