How’s the expense tracking going? Even though tracking your expenses seems like a pain, you’ll really find truth in the numbers. There is something really sobering about seeing exactly how much you pay for that uber-fru-fru gourmet java each day, or what it really costs you to eat out during the work week.
Today we’re focusing on the income portion of taking a budget snapshot. A budget snapshot is exactly what it sounds like. We’re going to do our best to look at your numbers exactly as they are right now.
When you open it up, we’re going to work in the Budget Snapshot Column of your worksheet. I like the idea of taking a snapshot of your budget to set a baseline for where you’d like to go from here on out. It’s very difficult to set financial goals if you have no idea where you stand.
How Much Money Do You Really Have To Play With?
Don’t ball park it. Get out your and/or your spouses’ latest Leave and Earnings Statement (LES) or paystub and read it.
Don’t know how to read an LES? Don’t worry. I have a 5-minute tutorial that will make you a pro in no-time.
Don’t know where to get the LES? La Chica’s got your back. Check out this quick tour of MyPay and learn how you or your spouse can set up a limited access account.
Military pay is fairly predictable. Barring a promotion or demotion or crazy pay error, you can pretty much expect the pay to be the same on the 1st and 15th of each month. Granted, we see pretty significant changes in military pay due to a PCS (Permanent Change of Station, a.k.a. military move) or a deployment, but let’s just keep it simple for now.
If you’re not in the military or married to the military, no worries. I am fluent in Civvie speak. You’ll need to grab your most current pay stub, if you’re salaried or have a regular, predictable hourly schedule. If your hours vary, you work on commission, or you earn overtime, you might want to grab 3-6 months worth of paystubs to help you get an accurate picture of your income.
Note to the wise: If your pay fluctuates due to scheduled hours, commission, or overtime, I strongly urge you to create your budget by only including the salary you can 100% count on. So, if you periodically pick up OT here and there, or get killer commission every now and again, don’t budget on the amount that you really like earning…be real. If you build a budget based on am inflated income, you will be in deep doo-doo. And you will most certainly find yourself overspending…and duping yourself into thinking you make more than you do. That’s a big no-no!
Get Intimate With Your Paystub
Bow-chicka-wow-wow…okay, maybe not. I bet half of you don’t even look at your paystub every month, because even I forget to look sometimes! Okay, very rarely, but it happens to the best of us. Here’s a sample of what you information expect to find when you read your paystub:
- Sensitive personal information, possibly your SSN (don’t leave your paystub or LES out all willy-nilly)
- Gross Income & Allowances
- Federal & State tax (withholding, status, and exemptions), Medicare, and Social Security
- Your contributions towards Insurances (Life, health, dental)
- Retirement savings plans
- Contributions towards an HSA (Health Savings Account)
- Allotments you authorized to additional bank accounts, charities, or alimony or child support
- Fine print about updates to payroll or your file
Once you’ve read over your paystub, input your current gross income into the section in the worksheet entitled “Current Income.” Don’t roll your eyes at me, I want this to be crystal clear. And common sense isn’t so common, you know?
If you have more than one job or source of income, like rental income, list it in the “Current Income” section. You can personalize each source by overwriting Income 1, Income 2, and Extra Income with your preferred title.
After you enter the income, scroll down or look down and find the subsection, Taxes. Plug in your monthly withholding for your federal and state taxes where applicable. Feel free to add your federal taxes, medicare, and social security taxes and put that in the “Snapshot” column for Federal.
If you have deductions for Insurances, Savings or Investments, Alimony (Legal), Child Support (Legal), and Charity, do the same. Find the sections and put in the totals for each type of expense.
Now go check out the section towards the top labeled “Current Balance.” If you’re filling out the sheet via Excel, then guess what? It self tabulates! Yay! No calculator necessary.
At this point, you’ve got a pretty clear idea of your net monthly income. Net income is the amount of money you have left after taxes and other deductions are removed from your salary (gross income).
Budget Scrubdown Homework Assignment
- Continue tracking your expenses.
- Gather up your utility bills, 3 months credit card statements, 3 months of checking statements, and stick them in your folder. You don’t have to print them, but you might want to…oh, and grab a highlighter, too.
Next Step: Budget Snapshot Part 2- Determine Your Monthly Expenses (Monday’s post!)
Don’t forget to enter La Chica’s For Dummies giveaway contest!
For the next 8 weeks, you’ll have a chance to win a book from the For Dummies series compliments of the fabulous publishers, John Wiley & Sons. We’re in the first week of the contest. To enter this week’s giveaway, read the Budget Scrubdown kickoff post.
This week’s giveaway ends on Friday, August 24th at 11:59pm CST. Giveaway open to US Residents, 18 years and over. Void where prohibited by law.
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