Outlining an annual budget can make a big difference in anyone’s financial life. Unfortunately, only a few folks take time to do it.
Rather than making haphazard payments and purchases that put you in debt by the end of the year, why not try planned spending for a change? Grab a pen and sit down at your desk or use your computer to set up an annual budget.
Begin with Budgeting 101
Whether you create an accounting spreadsheet in Excel, rely on Word, or simply use pencil and paper, the first step is to estimate your income for the year. Then, jot down where all your money will go. Make a list of every penny you’ll need to pay over the course of 2020:
Record your income
How much money do you expect to make this year? Record your projected earnings in the left-hand column. Subtract salary deductions, such as Social Security, Medicare, taxes, 401(k) or flexible spending accounts. List only your final take-home pay, or net income. If you have extra financial resources (such as interest, dividends, rental property, etc.) add your net profit to your total income if you plan to use it.
Estimate expenses for the whole year
Be sure to include every bill you’ll need to pay, plus everything else you plan to purchase or spend money on over the next 12 months:
Rent / House Payment / Repairs / Home Insurance $________________
Utilities / Phone / Internet / Electronic Services / Repairs $________________
Transportation / Car Payments / Insurance / Gas / Parking $________________
Food / Groceries / Snacks / Restaurants / Coffee Shops $________________
Personal Care / Health Insurance / Medical-Dental Expenses $________________
Loans / Student Loans / Payments on Furniture, Upgrades, etc. $________________
Clothing / Shoes / Garment Cleaning and Repair $________________
Vacations / Entertainment / Subscriptions / Fees $________________
Total Net Income: $_________________
Total Expenses: $________________
People who put together budgets usually estimate monthly income and expenses, but you’ll have a better overall picture of your finances if you start by planning an annual budget, then break it down by month.
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