Types of Budgets: The Income-and-Expense Budget
- By Budgeting Help
- Published 07/2/2007
- Budgeting
- Unrated
Types of Budgets: The Income-and-Expense Budget
There are numerous ways you can design and implement your budget to best suit your income and spending style. You can alter different aspects of it to make it easier for you to adhere to your projections. See the budgeting-help.com articles on “Pre-Budget Setup” for more details on how to alter budgeting periods, expense accounting, and allocation.
As far as types of budgets, two widely-used budgeting formats for personal finance include a more basic income and expense budget, as well as the zero-based budget. If you are not a salaried or traditionally-employed individual, there are modifications for income estimations that you can make before implementing either type of budget.
The Income-and-Expense Budget
With this basic budgeting format, the outcome should be positive cash flow at the end of a budgeting period. You are first tracking your income to get an average income based on a 52-week salaried or 12-month working schedule. From there, you can project the monthly expenses you will be deducting from your income.
For periodic expenses (those that only occur annually, like car registration, etc), the total expected cost is divided by total budgeting periods per year. For instance, if your registration is $240 per year, and you maintain a monthly budget, you would be setting aside $20 each month for the registration you will eventually pay. Additionally, an emergency expense amount for unplanned costs is set aside each month.
With the income-and-expense budget, it is fairly easy to set up expenses and deduct them from your expected income for a budgeting period. However, there is no clear plan for the positive cash flow you may generate unless you have devised a separate protocol for your savings goals. There is the potential for overspending in some expense areas with free-floating cash available in a checking account, or impulse buying.
Modifications for Irregular Income Earners
If you earn irregular income, you might find it difficult to adhere to deducting from an income that varies, or allocating the funds you may not have. However, you can implement either type of budget by estimating an average income.
Most likely, you will do so on a monthly basis, but you will need to start by tracking receipts of all income earned over past quarters or months. From there, you can total all income earned for your tracking period, then divide that among your proposed budgeting periods. For instance, if you decide to use the zero-based budget, you can track the past 6 months of earnings, then divide the total by 6 to get your estimated average income that you can allocate into different expense or spending categories (see “Types of Budgets: The Zero-Based Budget for more information). If you use the income-and-expense budget, you can deduct expenses in a given period from the estimated average income of the same time frame.
References
Howtodothings.com. How to Save Money
Gettingfinancesdone.com. What is a Zero Based Budget?
John Casteele. How to Budget on a Irregular Income
As far as types of budgets, two widely-used budgeting formats for personal finance include a more basic income and expense budget, as well as the zero-based budget. If you are not a salaried or traditionally-employed individual, there are modifications for income estimations that you can make before implementing either type of budget.
The Income-and-Expense Budget
With this basic budgeting format, the outcome should be positive cash flow at the end of a budgeting period. You are first tracking your income to get an average income based on a 52-week salaried or 12-month working schedule. From there, you can project the monthly expenses you will be deducting from your income.
For periodic expenses (those that only occur annually, like car registration, etc), the total expected cost is divided by total budgeting periods per year. For instance, if your registration is $240 per year, and you maintain a monthly budget, you would be setting aside $20 each month for the registration you will eventually pay. Additionally, an emergency expense amount for unplanned costs is set aside each month.
With the income-and-expense budget, it is fairly easy to set up expenses and deduct them from your expected income for a budgeting period. However, there is no clear plan for the positive cash flow you may generate unless you have devised a separate protocol for your savings goals. There is the potential for overspending in some expense areas with free-floating cash available in a checking account, or impulse buying.
Modifications for Irregular Income Earners
If you earn irregular income, you might find it difficult to adhere to deducting from an income that varies, or allocating the funds you may not have. However, you can implement either type of budget by estimating an average income.
Most likely, you will do so on a monthly basis, but you will need to start by tracking receipts of all income earned over past quarters or months. From there, you can total all income earned for your tracking period, then divide that among your proposed budgeting periods. For instance, if you decide to use the zero-based budget, you can track the past 6 months of earnings, then divide the total by 6 to get your estimated average income that you can allocate into different expense or spending categories (see “Types of Budgets: The Zero-Based Budget for more information). If you use the income-and-expense budget, you can deduct expenses in a given period from the estimated average income of the same time frame.
References
Howtodothings.com. How to Save Money
Gettingfinancesdone.com. What is a Zero Based Budget?
John Casteele. How to Budget on a Irregular Income