Creating A Budget ...

How To Create A Yearly Estimate Of Income And Expenses

Creating a budget for the whole family requires you to calculate a yearly estimate of expenses and income. It isn't a hard thing to do. It will only be hard if you don't keep records of anything.

But even if your record keeping consists of receipts piled into a shoebox; that is better than nothing. If you use a debit card or checkbook to pay your bills, then it will be easier.

When creating a budget, you must first, gather up all your records. This will include the receipts you have for every bill you had to pay over the last 12 months.

Some bills you only have to pay on an annual basis. This is mostly insurances and the like. Other bills may be monthly, or every three or six months. Make sure you have them all. Add them up, then divide the number by 12. This will give you an average of what you spend every month.

Now you need to add up the records of your income. Pay stubs should be of help here. There are two amounts to your income. The first is your gross income. That is what you earned before anything has been taken out.

The second is your net income. This is sometimes referred to as your take home income or pay. Your take home pay is the amount you have left once tax and other withholdings have been taken out of it. They are usually deducted automatically, so you don't really see that money you earned except as a figure on paper.

Your net income is the amount you will add up to compute your yearly estimate of income. Once you have both figures - that is, your income and expenses, double check to make sure you haven't forgotten something, then subtract the expenses from the income. What you have left over is what you decide to save or spend.

It's a good idea to do a bit of both. The discipline of saving is a good habit to get into and you'll thank yourself for it in the future. Until you learn to save a little each week or month, you'll never have enough money and you'll always feel that your money is controlling you, instead of vice-versa.

While creating a budget, you could of course, add up your gross income instead, but if you do that don't forget to also add up those automatically deducted bills like state and federal taxes when you are doing your expenses. Adding up your gross income might make you feel really good, because it will be so much more than your take home pay. Don't you wish you didn't have to pay taxes?

Creating a budget is a requirement to a good stable financial plan.

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