Record Your Income
As mentioned before, when making a budget one of the most important steps is figuring out what your current financial situation is. You need to figure out the exact number of all income that you have. This can sometimes be a difficult process for people, especially those who are not good with numbers or have multiple forms of income to keep track of.
If you are a person who is not sure of how to or has difficulties when trying to figure out your exact income, this chapter is meant for you. Do not feel overwhelmed! Yes, it may be a difficult process and be quite stressful, but with proper tips and the useful information this next chapter will provide you with, financial success is right around the corner.
Continue reading to learn more about recording your income, its importance, and how you can do it.
Figure Out What You Make
You need to factor in all forms of income, no matter how small they may be. A lot of people make the mistake of shortchanging their selves while doing this step because they may think that certain forms of income are too small to count. All forms of income must be counted; cutting yourself short can completely mess up your budget. All the small things add up, so make sure to count them!
The following steps will help you to figure out what your exactly monthly income is:
Calculate The Amount In Your Liquid Accounts:
A liquid account is a general term and can include many different types of accounts. It basically refers to any type of account that you can draw money from on a moments notice. The account may include your savings account, your checking account, as well as your investment account. While checking how much is in each one of these accounts it is important for you to remember that some of these accounts build interest and that some may have expenses attached to them. This must also be factored into your numbers as it will make a big difference while making your budget, even if it does not seem like it now.
Figure Out Your Exact Monthly Income:
The next thing you need to do is figure out what your exact monthly income is. As mentioned before, this can be more difficult for some compared to others for many different reasons. Maybe they have more than one form of income or maybe they get confused by math, either way, it can be quite complicated for them. Keep in mind, this is not usually an easy process for any person but it can and must be done.
For those who work on hourly wages, you will begin by figuring out what your hourly pay is and then multiplying it by the number of hours you work each week. For those who have varied schedules, it is advised that you use the hours from the lowest week instead of the highest because it will prevent you from falling short in the future. Once you have done this you multiply that number by four because there are four weeks in a month. The number you calculate will be your total monthly income, that wasn’t that hard right?
For those who work on salary wages, you will need to figure out how much you make on a monthly basis instead of yearly. This is because it is much easier to stick to and create a monthly budget rather than an annual one.
All you will have to do is take your total yearly income and divide it by twelve. The figure you come up with will be your total monthly income.
For those who work odd jobs or do not have regular work, this process can be a little more difficult. What you need to do if you are one of these people is come up with an average amount of income for the past six months to a year. It is advised that you use a month that had hard times so that you allow yourself breathing room while you create your budget.
It is important to remember to factor in all other forms of extra income as well. Any amount needs to be factored in, no matter how small it may be. This is because you need to be very precise while figuring out how much money you pull in on a monthly basis. Everything from alimony to child support needs to be considered. Even something as small as cash back on credit card purchases needs to be accounted for in your list of earnings.