How much do you really have to earn to survive? Part 1 of 2

Establishing your realistic personal budget will guide you to fiscal safety.

Do you know if you actually earn enough income to realistically cover your monthly expenses? Have you figured out how much additional income you really need to earn to do so? Budgets are a simple way to outline your income and expenses. Income can easily be identified, even if variable. Expenses may take a little time to get an accurate trend of, but can easily be estimated. Use of a spreadsheet program such as Excel can be a quick way to track variable expenses over a period of time.

In simplistic terms, if this data is not easily obtained, simply underestimate your income and over-estimate your expenses. If you can show a positive net income under these criteria, then you are in good shape. Excess income should be invested for retirement, emergency expenses or simply to grow net worth. There are many choices available so consulting with a Financial Advisory may be prudent.


Income sources such as salaries, bonuses, dividends, etc., should be factored in. For this example, we will only use a standard salary, which is typically a fixed amount. Using the net (Gross Salary minus Deductions) will provide the most accurate picture, especially since this is actual cash you receive, also known as your take home pay.

If you don’t yet know your net income, or if your net pay varies, utilizing an online salary calculator can help give you an estimate of what your net income will be.

Example: (this is only a fictional example for purpose of illustration)

Monthly Income

Gross Salary (Monthly):  


Deductions at 30 percent (taxes, retirement, health care):     


Net Income (Take Home Pay):



List your monthly expenses such as rent or mortgage, car payments, insurance, utilities, groceries, personal care items, household items/maintenance, debt (student loans, personal loans, credit cards, etc.), entertainment, and discretionary spending.

Some of these amounts change month by month, such as utilities. However, if you track them, typically it can be very easy to identify increases and decreases throughout the year. Depending on how specific you want to get, using a high average or the trending seasonal fluctuations are up to you.

One note of caution — keep in mind things known as UFO’s (Un-Foreseen Occurrences), which are unplanned expenses that pop up from time to time throughout the year. It is a best practice to factor in a “Miscellaneous” category under your expenses listing.

Example: (this is only a fictional example for purpose of illustration)

Monthly Expenses



Car & Insurance:


Home/Renters Insurance:


Utilities (Electric, Gas, Cable, Internet):     


Student Loans:  


Debt (Credit Cards, Personal Loans):




Personal Care:


Household Maintenance:


Recreation & Entertainment:


Savings / Emergency Fund:




Total Monthly EXPENSES:


Calculate the net impact of this budget by subtracting your total expenses from your net income. If you realize a positive net income, you are in good shape and should continue to stay on top of this to avoid slipping into fiscal troubles.

Now that you have your numbers, in part 2 we will discuss what to do with them.

Michigan State University Extension offers a variety of programs to provide expertise, education, and development of communities throughout the state of Michigan. 

Did you find this article useful?