How to Calculate Budget
What is Budget?
A budget calculator helps you plan how to allocate your income across spending categories. The most widely used framework is the 50/30/20 rule: 50% of after-tax income to needs, 30% to wants, and 20% to savings and debt repayment.
Step-by-Step Guide
- 1Calculate your monthly after-tax (take-home) income
- 2List all monthly expenses by category
- 3Subtract total expenses from income to find surplus or deficit
- 4Compare your actual spending to the 50/30/20 benchmark
- 5Adjust categories to eliminate deficit or boost savings
Worked Examples
Input
$5,000/month income, $3,800 expenses
Result
$1,200 monthly surplus
24% savings rate — above the 20% target
Input
$4,000/month income, $4,500 expenses
Result
−$500 monthly deficit
Need to cut spending or increase income
Ready to calculate? Try the free Budget Calculator
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