Many organizations create annual budgets to predict income and meet organizational goals. Personal budgets generally track expenses each month to make sure bills are covered and financial goals are being worked on. You might be wondering if you could create an annual budget for your personal finances. There are ways to do this that come with multiple benefits. However, if bankruptcy is an issue, talk to a Tullahoma bankruptcy lawyer about your options.
HOW ANNUAL BUDGETING WORKS
Compared to monthly budgeting, annual budgeting works by calculating income and expenses ahead of time. This involves projected income and projected expenses. The process for budgeting annually is nearly the same as budgeting monthly. You subtract the projected expenses from your projected income for the next 12 months.
Predicting how much money you will spend in total for the next 12 months is not ever going to be perfect. No one can predict future events like unexpected financial expenses or emergencies. The best we can do is assume things will go well or subtract additional expenses for potential financial emergencies.
However, financial emergencies are what savings accounts are for. Hopefully, in that sense, you will be covered, and your annual budget plan will not be significantly disrupted. Either way, predicting annual income is often far easier since income tends to be stable from year to year. The only thing that could change this is a job loss or downgrading into a lower job position with lower pay.
In other words, annual budgeting will never be perfect. Rely on annual budgeting as a guide rather than an accurate prediction. The benefits include knowing what you can spend, moving toward your goals, and predicting financial problems.
CREATING YOUR PERSONAL ANNUAL BUDGET
When it comes to how to create a personal budget, this process starts with listing your financial goals. These goals will guide your financial decisions, how much money you need to save annually, and how much to cut down on spending. Next, calculate your average annual income and average monthly income.
Factor in how much income is left after taxes. Then calculate your average monthly expenses and use this to predict your annual expenses. Fixed expenses are easier to use to predict future expenses because they are your monthly bills. Flexible expenses cannot always be relied on to predict annual costs because they vary from month to month. These include groceries and entertainment.
Use your fixed and flexible expenses to calculate your total average expenses each month. Include products or services you anticipate purchasing or paying for in certain months. Add all this to find your total annual expenses. Subtract these expenses from your income.
Compare what money you have left to the money needed for your financial goals. Use this to decide what expenses to cut to move closer to these goals.
BANKRUPTCY LAWYER IN TULLAHOMA, TN
Do not panic if bankruptcy looks like it might be your only option left. You can contact us at Tom Bible Law today at (423) 690-7712 for a consultation about how bankruptcy works. Our legal team of Tennessee bankruptcy attorneys can help you choose the best bankruptcy option for your current financial situation. We serve clients in the Tennessee cities of Chattanooga, Kingsport, and Tullahoma.