Budgeting Basics - Step 1 - Income

Think about your sources of income. Where does the money come from? How often?

Here's an article that helps clarify, especially if you have a more complicated situation such as a variable income.

• Don't figure your income on a monthly basis unless you get paid once a month. Figure it based on the pay period you actually have.
• If your pay is variable, do look back to find your smallest check over the last two years, but also try to get an average amount for the last couple of years. Both pieces of information can be helpful in planning.
• This is gross income, not net. Don't deduct taxes or other items that probably are withheld from your check.
• Ultimately we will be planning based on annual income, so keep that in mind.

Have you collected some paystubs? (These are probably stored online somewhere. That's good, because once you find that "somewhere" you can easily review a series of paystubs.)

Start with either an exact figure, exactly how much is earned in each pay period, or with a worst case scenario, the lowest amount earned in a pay period over the last two years.

*If* the income is totally predictable, such as a flat salary with no overtime, then use this exact figure in your calculations.

*If* the income sometimes varies, then use the lowest amount from the last two years or use your average annual income for the last two years or some other reasonable amount that reflects what you expect to earn.

Now it's time to start making a list! You can use any budgeting worksheet you want to use. This link is to a format that *I* use, and you may copy it to your own Google Drive or download it to your computer. Then you can start filling it in.

Just fill in the Projected Income - Gross Wages section.  It's set up for you to put in a monthly amount and it will calculate an annual amount.  If you fill in an annual amount in Annual spot, a monthly amount will be calculated to the right.

We're working with gross income, before any deductions have been taken out.  I like to work with this figure because I want to see the deductions on my worksheet so I can consider changing them if I need to.  If you don't want to work with these right now, you can use the net income instead and simply skip the step where deductions are recorded.

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