Now that we have all your incomes and expenses in our table, let’s get down to business. We’re tallying sums for each category or the grouping you’ve chosen, as well as for total income and expenses. Voilà, you now have your “budget” laid out for each category. A budget is essentially a plan detailing how much you can and want to spend on each.
In the next step, subtract the total expenses from your income, and voila, the monthly balance is calculated. Ideally, the balance is positive, giving you room for savings and financial security. If the sum is negative, it’s time to swiftly move on to the optimization step. For the upcoming stages, it’s also helpful to supplement the percentages of expense groups in relation to your income.
To provide an even clearer picture of where all your money is going, consider adding an annual estimate. Simply multiply the monthly figure you’ve calculated by 12. You might be surprised by how much you’re spending in different categories each year.