Every year brings new challenges. While it’s hard to plan for everything, a yearly budget can help you plan your expenses and give you a view of your finances. Creating a yearly budget is easier than you think and won’t take you more than an afternoon. Here is our guide to creating a yearly budget that can help you predict your cash flow for the year.
Step 1: Calculate Your Income
Grab your paystubs! If you are a salaried employee this will be as easy as getting your check amount and multiplying it by the number of times you get paid per year. If you’re an hourly employee simply add up the total amount of each check. Both of these values will give you the amount of cash you have to spend each year.
Step 2: List out monthly expenses
Each month you will have set living expenses that you need to cover. Things like housing, utility bills, groceries, and other expense that you have to pay to keep a roof over your head. Create a total for these and multiply it by 12. This is your annual living expenses. You can subtract this from your total income and this will give you your remaining cash for spending on the next step!
Step 3: Emergency fund & Savings
We are big believers in having a good solid foundation to fall back on in case of emergencies. With your remaining funds, you should be setting aside a minimum of three months’ living expenses for your emergency fund. As you build that you should also be building a savings account so that you have cash available for larger purchases like cars, appliances, or home improvements.
Step 4: The Wishlist
Once you have your savings account built up, you can begin to think about the things you really want to buy. Maybe you want a new TV for your man cave or it is time to go on an amazing vacation. You can add these things to your budget and figure out how much of your cash flow you want to dedicate to making these things happen!
Step 5: Reflection
Be honest with yourself. If you made it this far I would hope that you are going to put some effort into bettering your personal financial situation. Stick to your budget for at least 3 months and see how it feels. If it is not working out then change it! If you need help getting started be sure to check out our budgeting tool. If at any time you have questions be sure to reach out to our team! We are more than happy to give advice.
