Elements of a Budget

Income: Sources

Include all sources of income, such as salary-wages, freelance earnings, side hustles, investments, or government benefits

Income: Net Income

Calculate net income (after taxes and deductions) to determine spendable cash

Income: Irregular Income

If income fluctuates, use a conservative estimate based on past earnings

Expenses: Fixed expenses

These remain consistent each month, like rent-mortgage payments, insurance premiums, and loan repayments

Expenses: Variable expenses

These change monthly, such as groceries, utilities, entertainment, and clothing

Expenses: Irregular expenses

Account for expenses that occur periodically (e.g., annual subscriptions, car maintenance, holiday gifts)

Expenses; Needs and Wants

Categorize expenses as essential needs (food, shelter, transportation) or discretionary wants (entertainment, dining out)

Savings: Emergency fund

Prioritize building an emergency (3-6 months of living expenses) for unexpected costs

Savings: Short-term savings

Save for specific short-term goals, such as vacations or large purchases

Savings: Long-term savings

Include retirement savings, college funds, or other long-term financial goals

Debt management: Debt repayments

List all debt obligations (credit cards, loans) and plan for their repayment

Debt management: debt reduction strategy

Employ a strategy to reduce high-interest debt and improve your financial health

Financial goals: identify and prioritize goals

Define short-term (e.g., building emergency fund) and long-term goals (e.g., retirement)

Financial goals: allocate funds

Direct a portion of income towards achieving these goals

Tracking and adjustment: Monitor spending

Track income and expenses throughout the month to stay on budget

Tracking and adjustment: adjust as needed

Review the budget regularly and make adjustments to spending and saving as needed