What Kinds of Income to Include in a Budget?
We are continuing our teaching on budgeting. We’ve already identified the parts that are to be included on a budget, mainly income and expenses. In this lesson we are going to continue discussing the topic of how to create a budget, focusing on what is income and what kinds of income to include in a budget.
Income, for our purposes, will be anything that adds to your liquid cash assets on a regular basis. Income is not equity, nor interest accumulated but not yet available, such as by a CD account or money paid off on your mortgage. Liquid cash assets is money that you have available to spend at any time you desire. A CD is not a liquid asset because you must wait until a certain period of time before having access to the funds that were put in and the interest that has accrued. If you are paid out your interest from a CD on a regular basis, even though you can’t withdraw the original funds, then the interest would be considered income.
What are types of incomes to consider?
The payments made to you by an employer for your work. You can either use Net income here (how much is actually given to you after all deductions) or Gross and count all of the deductions as expenses. You can decide what is best for your budget.
Do you do any side work? Rent out something you own? This would be considered business income and can be included on a personal budget if it doesn’t make it too complicated. You may want to keep a separate budget for your business and just include the bottom line on your personal budget.
Amounts paid to you that are available during the budget period. This would be interest on savings and checking accounts, CD’s that pay interest instead of accumulate, or other interest that is paid to you.
Child Support or Alimony
Do you receive payments from someone else as a result of a family settlement? This is included in income.
Any other stipends paid to you on a monthly basis, such as living expenses of someone living with you, lottery winnings paid regularly, etc. Anything else that is paid on a regular basis.
If you receive irregular income of some sort during a budget period, you can include that as income too, but be careful of how it may tie out your numbers at the end. You may just want to keep it separate for the sake of tracking the purchases made with it separately.
Those are the basics. If you are following this and working towards building your own budget, then start thinking about what various types of income you have and would like to include on a personal budget.
Next will be expenses.