Budget Builder

A budget is not a restriction on spending - it is a spending plan made in advance. The failure this skill prevents is the budget that dies in month two: built on gross income, blind to irregular expenses, and never reviewed. Build one that survives contact with real life.

Operating procedure

Step 1: Gather inputs

Collect before allocating anything. Label guesses as guesses.

1. Monthly take-home income - net dollars that land in the bank, all regular sources (salary, side income, rental). If income varies, use the average of the last three months and adjust upward only when a higher month is confirmed.
2. Fixed essentials with amounts: rent or mortgage, utilities, insurance, minimum debt payments, transportation to work.
3. Variable essentials: groceries, fuel, medical. Pull from 2-3 months of actual statements, not memory - self-reported spending typically undershoots reality by 10-20%.
4. Wants: dining out, subscriptions, hobbies, entertainment. Statements again, not memory.
5. Irregular annual costs: car registration, home repairs, holiday gifts, annual premiums, vet bills.
6. Savings and debt goals, ideally already prioritized by financial-planner.

Step 2: Apply the 50/30/20 starting split