Module 2 · Lesson 1

Find Your Real Numbers

15 min read

The Problem

Most budgets fail before they start, because they are built on guesses. People budget against their salary before taxes, a number they never get to spend. They forget the yearly subscription. They estimate groceries low and eating out lower. Then the budget does not match real life, and it gets abandoned.

This lesson fixes that with four numbers pulled from real documents. You will do this on paper or in a spreadsheet. You do not need an account yet. Nothing here happens in the app until Module 5.

What You'll Do

Grab a notebook or open a blank spreadsheet. You will work out four numbers, one section at a time:

  1. Monthly Take-Home Pay
  2. Monthly Fixed Expenses
  3. Monthly Variable Costs
  4. Monthly Debt Payments

Label each one exactly as written. Later lessons ask for them by name.

Part 1: Take-Home Pay

Gross pay is your salary before deductions. Take-home pay (also called net pay) is what actually lands in your account after taxes, Social Security and Medicare, health insurance, retirement contributions, and anything else your employer withholds.

Budget against gross pay and you will always come up short. Budget against take-home pay and every number after this one starts from reality.

Worksheet: Take-Home Pay

Sample pay stub showing gross pay minus deductions equals take-home pay

  1. Find your last 2 or 3 pay stubs. Paid irregularly (freelance, commission, tips)? Pull your last 3 to 6 months of bank deposits instead.
  2. Write down the net pay from each one.
  3. Convert to a monthly figure:
    • Paid weekly: multiply one paycheck by 4.33
    • Paid every two weeks: multiply one paycheck by 2
    • Paid twice a month: multiply one paycheck by 2
    • Irregular income: average the last 3 to 6 months. If it swings a lot, use your lowest month as the baseline.
  4. Label the result "Monthly Take-Home Pay."

Only count money you have actually received. Bonuses, tax refunds, and side income you hope for do not go in this number.

Part 2: Fixed Expenses

Fixed expenses are the bills that show up every month at about the same amount. Rent or mortgage. Insurance. Phone and internet. Subscriptions. Minimum loan payments. Childcare, if it is a set amount. They are the foundation of your budget because you can count on them.

Some fixed expenses come once or twice a year: a yearly subscription, an annual insurance premium, property taxes, a credit card annual fee. Divide those by 12 and treat them as monthly. That is how you stop a $600 bill from wrecking March.

Worksheet: Fixed Expenses

  1. Pull your last 2 or 3 months of bank and credit card statements.
  2. Circle every charge that repeats each month at the same amount.
  3. For each one, write down the name, the exact amount, and the day of the month it is due. The due date matters later for cash-flow planning.
  4. Add any yearly or twice-yearly bills. Divide each by 12 (or by 6) and write down the monthly figure.
  5. Add them all up. Label the total "Monthly Fixed Expenses."

If this number is more than half your take-home pay, you already know your budget will be tight. That is useful information. It is not a reason to stop.

Part 3: Variable Costs

Variable costs change month to month: groceries, gas, electric and water bills, eating out, entertainment, haircuts, clothing, gifts. This is where most budgets leak, because small purchases add up quietly. It is also where you have the most control.

You cannot look these up on a bill. You have to average them.

Worksheet: Variable Costs

  1. Pull your last 3 months of bank and credit card statements.
  2. Sort every non-fixed charge into a category. Keep it simple: Groceries, Restaurants, Gas and Transportation, Utilities, Entertainment, Personal Care, Everything Else.
  3. For each category, total the three months and divide by 3:
   Average = (Month 1 + Month 2 + Month 3) ÷ 3
  1. If a category swings with the season (heating in winter, travel in summer), use the highest recent month instead of the average. Plan for the expensive version.
  2. Add the category averages together. Label the total "Monthly Variable Costs."

Later, once your transactions are in the app, the Budget Averages Report does this math for you across any number of months. For now, doing it once by hand shows you exactly where the money goes.

Part 4: Debts, Including Interest

Debt is money you owe: credit cards, student loans, a car loan, a mortgage, medical bills, money borrowed from family. Every debt has three numbers that matter: the balance, the interest rate (APR), and the minimum monthly payment.

Interest rates tell you which debt to attack first. Anything over 15% (most credit cards) costs you real money every month. Under 5% (many student loans and mortgages) can usually wait while you handle the expensive stuff.

Worksheet: Debt Inventory

  1. List every debt. Check the most recent statement or log into each lender's site.
  2. For each one, write down the creditor, the current balance, the interest rate, the minimum payment, and the due date.
  3. Add up the minimum payments. Label the total "Monthly Debt Payments."
  4. Work out your debt-to-income ratio:
   Debt-to-Income = (Monthly Debt Payments ÷ Monthly Take-Home Pay) × 100

Under 20% is healthy. 20% to 40% is manageable but worth watching. Over 40% means debt is limiting your options, and paying it down should be a top budget line.

Once your transactions are in the app, Custom Reports can total your debt payments for you by filtering on tags like Auto Payment, Credit Card Payment, and Loan Payment. The Budget Spreadsheet View on any budget shows the same totals.

Put It Together

You now have four labeled numbers. Do one last piece of arithmetic:

Monthly Take-Home Pay − Monthly Fixed Expenses − Monthly Debt Payments = what's left for variable costs and savings

Compare that result to your Monthly Variable Costs. If variable costs eat all of it, you have found your first budgeting decision. That is the whole point of this exercise.

Key Takeaway: A budget is only as honest as the numbers under it. Take-home pay, fixed expenses, variable costs, and debt payments, all pulled from real documents. These four numbers start on paper, and they are the first thing that goes into the app in Module 5.

Check Your Understanding

  1. Why budget against take-home pay instead of gross pay?

    Answer: Gross pay is before taxes and deductions. You never get to spend it. Take-home pay is what actually lands in your account, so a budget built on it matches real life.

  2. How do you handle a bill that comes once a year?

    Answer: Divide it by 12 and treat that amount as a monthly fixed expense, so the money is set aside before the bill arrives.

  3. Which debt should get extra payments first, and why?

    Answer: The one with the highest interest rate, usually a credit card. High-interest debt costs the most each month, so paying it down first saves the most money.

  4. Why does this lesson use a Worksheet instead of steps in the app?

    Answer: These numbers come from documents you already have, and you do not have data in the app yet. They go into the app later, in Module 5.