How to Budget Your Money: Part 2
If you haven’t read How to Budget Your Money: Part 1, go back and read it before continuing.
List Your Income
Now it’s time to start putting all those numbers on paper. We are going to start your budget by listing your income first. Write each income source and the expected monthly amount on a separate line item. Not all incomes are the same, some people might have a fixed income, while others have a variable income based on hours worked or bonus. When a bonus is paid out, it can be difficult to estimate the amount prior to receiving the money.
If you fall into the bonus category, I want you to write your bonus income on a separate line using the minimal amount that you expect to receive for the month. You don’t want to estimate an income higher than you can actually receive, so always use the least possible amount you expect to receive. You’re much better off to have to worry about what to do with the extra money than to fall short for the month. If for some reason you are not going to earn a bonus during the month, put down zero for the expected bonus.
You’ve finished your monthly budget and you received your bonus check, now you have an extra $500 this month that’s not listed in your budget. It’s time to get out your budget, and write down the actual bonus income that you received in the column labeled actual. What are you going to do with all that extra money? If you’re working with a balanced budget, which hopefully you are, you need to give that money a home and decide where that extra money is going to go. Here are the priorities for using unexpected income: initial emergency fund, paying off debt, finish building emergency fund, retirement fund, or house payment.
Continue reading How to Budget Your Money: Part 3