How to Make a Detailed Annual Budget
A detailed budget allows you to closely track your spending. It makes it easier to stay on budget and prevents you from having unexpected expenses ruin your budget. A detailed budget should include all of the expenses you will have over the next year. It should also have enough set aside to cover emergency expenses such as car or home repairs. Tracking your spending and sticking to your spending limits are both keys to making your detailed budget work.
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Instructions
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Gather a list of your transactions for the last year. A look at the entire years allows you to spot annual transactions such as taxes and insurance payments, which makes it easier to budget for them.
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Divide the spending over the last year into categories, and average the amount spent in each category for the year. If you have budgeting software, it will do this for you. If you do not have budgeting software, you can do this for only the last three months, but look over the entire year’s transaction to spot large annual expenses you need to include.
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Determine the amount of your expected income for each month. If you work on commission, you can average out your income or take the lowest amount you made last year and base your monthly budget on that. The extra you make each month can go into a savings account or you can use it to make bigger purchases you've put on a wish list for your extra income.
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List the amount you expect to spend in each category. Many people forget to include items like trips to the vending machines, daily coffee or other inconsequential purchases that add up quickly. Be sure to include your annual expenses; divide these by 12 and budget that amount so you will be covered when you need to pay it. Savings should be included in your budget as well.
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Total the amount of your expenses and compare them to your monthly income. Adjust your spending so that it is less than your income. If you have extra money, increase your savings or other categories.
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Set up a tracking system that allows you to track spending in any category. Money management software simplifies the process, but you can use paper and a pencil if you prefer. This needs to be done on a regular basis. Make a note of any transactions that do not fit into one of your budget categories, so you can adjust next month’s budget.
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Adjust next month’s budget according to your spending for the previous month. You may have estimated too much money for some categories and not enough for others. It often takes two or three months for a budget to work itself out. Continue to track your spending and make adjustments until you have a working detailed budget.
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Tips & Warnings
An emergency fund of six months of expenses can protect your family in the event of a job loss. Set aside money each month until you have reached that amount. Do not use the money unless you have to, and then work to replace it as quickly as possible.
References
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