Income and Expenses

Determining your monthly income and expenses is the first step in establishing strong financial planning.

With a firm knowledge of your income and what you spend helps you move forward in creating a powerful financial plan to increase your net worth and establish a financial safety net.

If your expenses are less than your income, you will have a positive cash flow.

However if your expenses exceed your income, you will be going into dept each month.


This isn’t good.

You will need to make adjustments as quickly as possible to move into positive cash flow territory.

You can set up this information on a spreadsheet on all your income and expenses. If you don’t know how to set up a spreadsheet (like Microsoft® Excel), ask a friend to set one up for you. Have him/her show you the basics of how to track this.

Another good method to track your expenses is through a money management program like Quicken®. These types of programs are relatively not expensive and can be invaluable to help you with financial planning.


Determine Your Monthly Income
Add up all your sources of income. If you work for someone, use your monthly take home pay after taxes. Add up any other income sources of income as well. See below for an example.


Income Per Month


Determine Your Monthly Expenses
Determine your monthly bills by listing all of the bills you pay on a monthly basis. Use your checkbook to find out where your spend your moneys over the past 3-6 months.

Don’t forget to add in the bills you pay on a quarterly, semi-annually, or annual basis. Divide these bills by the number of months the bill is for.

For example, I have a quarterly bill for homeowner’s dues of $120. The monthly amount is $120/3 or $40 per month.

Expenses to Consider
There are several things to consider when defining your expenses. Here is an example of an income and next, an expenses list. Add to it any unique bills that you may have.


Expenses Per Month



Expenses Per Month Chart


Don’t be concerned if you miss one or two things in this list. The important first step is to get this process started. Like any journey, you can refine and modify your list as your understanding of this process grows.

It is recommended to track your monthly income and expenses every month. This will strengthen your knowledge of your financial position and help on your road to financial planning and prosperity.


Determine Your Net Income (Loss)
Subtract your basic monthly expenses from your basic monthly income. If this is a positive number great! If this number is a negative number, this isn’t ot good. You must then do the following: Either:

• Cut down on your expenses (ex. entertainment, food budget etc).

If that doesn’t work you must :

• Increase your income
• Dip into your savings to pay your bills
• Sell off assets
• Or borrow money

Of all these items, increasing your income is the most preferential! Financial Planning Techniques has been created to assist you with this process.

This is a critical first step to get a firm grip on your finances. That understanding can lead to a strong financial plan.

This has been a quick overview on determining your income and expenses. Below are some powerful resources to go more into more depth on helping you to understand your finances better.


Next Step
The next step in your personal financial planning is to determine your Net Worth.

Return from Income and Expenses to Financial Planning