Financial focus month week 5: Budget for the Whole Year

A little while ago I showed you how my annual budget looks like. In today’s post I’ll share with you how to create your own one. It’s simpler than you think!

Let’s start with the same basics you would start any shorter term budget. You can do it on paper or in excel or any other programme by the way, whichever you prefer.

Draw a table if you are not using a spreadsheet that is already a table – you will want enough space to list items out in the first column and to note down amounts for every month or pay period in subsequent columns. Usually it’s 13 columns wide if you budget per month. If you budget per bi-weekly paycheck, then you’ll end up with 27 which is a little easier to do in excel or google docs! Once you have drawn out the table, and it doesn’t have to be a perfect drawing if you are doing it by hand, start with listing out all your income sources in the first column.

After listing out your income, list out your tithe and/or giving, if you are a giver. After that, list out any savings you are planning to pay for – this can include emergency fund, downpayment savings, holiday savings, Christmas etc.

Next, list out all your expenses, starting with those associated with keeping you safe, fed and healthy. These include any house payments like mortgages, utilities bills, food, annual insurance etc. Once you have these down, carry on listing out the less crucial things which you pay for like mobile phone, monthly subscriptions, going out/fun money, clothes, cinema and anything else you can think of that you spend money on regularly.

Finally, list out all debts.

You should now have a pretty comprehensive list of all your sources of income and all the places your income goes to, just without actual figures. If you know how much you spend on things, great. If you don’t, it’s worth pulling out your bank statements for the last 3 months and checking exactly.

Your next step is populating the table with figures. Fill in your income for every month. Fill in your expenses for every month, your savings and sinking funds, your debts. Then, to balance your budget properly calculate the value of all your income minus the value of everything you put it towards, including savings and debt payments for each pay period. I use zero-based budget which means that my goal is to have £0 left when I subtract money I allocated from money I made every month. There is a good chance that you will need to adjust your spending where possible to end up with a zero. This means either reducing something if you have a deficit (i.e. your income minus save and spend is below zero) or increasing savings and/or debt repayments, or any other category if you have a surplus (i.e. your income minus save and spend if above zero).

One of the reasons why I budget yearly is the ease of calculating my net worth when I seem what my money does in any given year versus the past year. I use the net worth figure as an indicator showing me whether my material situation, and therefore a prospect of financial freedom, are getting closer or not. To calculate your net worth add up the value of everything you own (use realistic value as if you were planning to sell your things, include any liquid assets too such as pension savings) and subtracting any and all debt I have. Resulting figure is the net worth. You can see my own evolution of net worth in this blog post: Wrapping up 2018 financially – net worth update.

Not sure how to start a budget? Feel free to use my one as an inspiration, downloadable from the freebies page.


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