By Guest Blogger Nick Zagacki, CPA
Planning for your near or long term future can be a daunting task, but it is a necessity for financial security. Tracking your income and expenses are a good place to start. Here are a few steps to follow to assist you in creating a budget for your personal finances on a monthly basis:
- Determine your total monthly income.
Include all salary, bonuses, dividends, rental income, and any other income you have for the month. Taxes need to be considered when gathering this total. If you are working as a contractor or performing freelance work, your paycheck will not include tax witholdings. When April 15 rolls around,you may owe the IRS a lump sum of money, so setting some aside taxes from your budget is a good idea. If you are a salaried employee, chances are your taxes are withheld on your paycheck.
- Calculate your total monthly expenses.
Mortgages, utilities, car payments, education loans, food, and entertainment. Be sure to include everything, even estimates and projections.
- Set a savings target for the year.
Whether you want to buy your dream house, vacation in a foreign destination, or continue your education, a significant amount of money may be necessary. After you determine the amount of money you have left (total income – total expenses), you can set a reasonable amount for your savings target.
- Create a budget tracker.
At the top of this article you will see an example of a budget tracker. There are many variations that can be downloaded from various websites for free. Customize a tracker to meet your needs.
- Maintain the tracker.
Creating the Budget Tracker is only the first step. Maintaining the tracker is vital to knowing where your money is being earned, spent, and saved. A convenient time to update the tracker is when you are paying your bills.
Hopefully this blog post will help you to take charge of your financial security and help you feel confident in the financial choices you make.
Get more personal finance advice in PICPA’s Money & Life section or find a CPA near you.
Originally published July 7, 2014
Nick Zagacki, CPA, is currently a senior associate in the advisory practice at the Philadelphia KPMG office.