A realistic budget is the most important financial tool in achieving your dreams and understanding your financial health. Your budget is both a plan and a gauge for how you are financially doing. If you have a surplus at the end of each month, you will be able to contribute to your savings and investments and thus grow wealth overtime. However, if you have a deficit at the end of each month, overtime you will need to take out more and more debt leading to wealth destruction.
In Excel, create a detailed annual budget for yourself one year post graduation. Ensure your budget balances (e.g., there is a surplus at the end). For each budget line item, specify your assumptions for how you arrived at that estimated amount such as a link to a source or the rough math (e.g., my restaurant budget is $2,400 because I eat out 10 times a month and each time it costs $20).
Include the following categories:
Income: Assume no parental help – you are financially on your own. Use expected income numbers if you know them or use OOHLinks to an external site. to estimate potential career salaries. If you use this source, take off 20% from the averages to account for starting out in your career. Specify multiple income streams or side hustles if needed beyond your primary job to ensure your budget balances.
Taxes: estimate at 25% of your income for now (you’ll later update this to be more precise for the portfolio project once we learn about taxes).
Expenses: Split expenses into variable and fixed categories. Use enough expense categories to adequately cover all expenses (minimum of 20 categories). You’ll later update your expenses to be more precise to include any debt repayment expenses such as student loan repayment.
Savings: estimate at least 10% of your income as savings for now (you’ll later update this to be more precise for the portfolio once we learn more about savings targets to cover building an emergency fund, saving towards retirement, and saving towards one other goal). Savings can be included as its own category or as a fixed expense (as in this class we are committing to your savings goals).
Here are two optional templates that can get you started:
Here is a monthly budget template Download templatethat lays out your entire year. You might want to add a seperate savings category to it or insert additional rows as needed for more fixed or variable expenses.
Here is a general budget and net worth template Download templateI created. The “projected budget” tab has a lot more detail than what you need for this assignment but helpful if you want to use ranges. If you only want to do an annual amount, you can just fill out the annual column and delete the monthly columns. Also included in this template is a tab for example expenses if you are having a hard time brainstorming enough expense types.
