Create a Budget – Second Half
***Just joining us? Create a Budget Page 1
6. Now that you have everything charted, you have a household budget! Use a column labeled YEARLY to calculate your annual spending or income in each category. Use a final column labeled MONTHLY to determine the monthly amount. Take the annual total and divide by 12. Deceptively simple. Make sure you have distinguished between expense accounts and income accounts, group them accordingly.
7. Did you capture everything? Is anything going to change with certainty in the near future? You may want to update the expected amounts for items you know will change and by how much. For example, you know your rent will increase by $50/mo, then add $50 to the MONTHLY column for rent.
Side note: if you want to use a CPI multiplier or other inflation adjustment, great! Go for it. The MONTHLY column is what we will use going forward. Adjust to your liking. But know why and by how much you are adjusting. Otherwise, don’t change it! This is an optional step.
Congratulations! You have finished “Create a Budget!” You may see some areas where you want to reduce spending. Great. That’s the beauty of a household budget – everything is right in front of you. Next up, CREATE YOUR PLAN!
A household budget is known to make members of the opposite sex swoon. Create a budget only if you can handle the heat!