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Project Your Budget

When you start your budget, the first thing you should do is calculate how much you expect to earn and how much you expect to spend. These expectations will help to guide you and are likely to actually keep you from overspending. You will know exactly how much you have to spend, and you are much less likely to go over budget.

When you are predicting your income and expenses, you should have it all divided into categories. However, I don’t recommend that your categories be too specific. This varies from person to person, but I prefer that you keep it simple, for the planning process at least.

Your Income

Your income is a simple category to predict. You should have a good idea of how much you make with each pay check. This should be the foundation of your expected income. You should also include any expected bonuses, tax returns, or other sources of income. Remember that these other forms of income can be less predictable. Better to underestimate your income than overestimate and overspend.

Taxes

Your taxes will automatically be reduced from your paycheck. You don’t necessarily need to include this on your budget, but you should have a category for any additional tax-related income/expenses. You can also have a separate section of your budget that calculates the percentage of your tax cut from your income.

Your Expenses

Your predicted expenses, like I said earlier, should be divided into several categories. Keep it simple. I usually like to have expense categories in the following:

  • Fixed Expenses: Rent/mortgage, phone, insurance, Internet, cable/Netflix, etc.
  • Variable Necessities: Food, utilities, car expenses.
  • Debt Payoff: School loans, credit cards, other loans.
  • Savings/Donations: Welfare expenses, personal savings, trust funds, investments.

You can fit most of your expenses into these categories.

Unexpected Expenses

Always allow yourself a little flexibility. Have a fund that is for personal interests. You should also have a savings that is set aside for emergencies. If you plan to be flexible, you will rarely go over budget.