Financial Freedom in 2021! Take Action: Day 4
This step is less intimidating than it sounds, but it does require knowledge of your fixed expenses and your list of priorities with their totals from yesterday’s post. This budget can be in any format that you’re comfortable with: a spreadsheet, an app, a sheet of paper. I prefer the “Personal Budget” template in Microsoft Excel; it’s formatted for a monthly budget but can be altered to enter amounts for annual income and expenses. I’ve also added a column for “Actual” expenses on my spreadsheet, in addition to “Budgeted”, so I can track our exact spending in each category. I’m sure there are *smarter* ways to keep track of everything, but Excel spreadsheets work for me, so I’m sticking with them. All you really need is a format that allows you to list your annual expenses and subtract those from your net income.
When making this list of annual expenses, think of those that are fixed and can be predicted for the year. Some of these expenses include mortgage or rent payments, property tax estimates, home owner’s insurance, car insurance, other insurances, a regular medical expense such as contacts or prescriptions drugs, car payments, annual subscriptions such as Costco or Amazon Prime, and tithing. After recording those fixed expenses, add lines for your priorities, such as an emergency fund, monthly investing, travel plans, and/or a big purchase. I like to include these in our annual budget so that when I’m preparing our monthly budgets, I use what’s leftover to plan our variable spending. I want the fixed expenses and our savings priorities set aside before we even begin our monthly spending on groceries, experiences, gas, clothing, etc.
Below is an example of what an annual budget might look like. The “Cash Balance” remaining is what will be used for monthly budgeting tomorrow.