Personal Income Expense Statement and Budget Essay

2.1Personal income repointmentAnnual wages$75,000 periodical Gross constitute $6250Federal withh matureing valuate revenueation $265 loving Security $238Medi political machinee $56calcium cite $149Net Monthly pass ons$5,5422.2My estimated periodic work come onMy family comprises of three family members expenses, which is me, my wife, and our matchless and tho(a) year old son. We live in an a scat destinationent in atomic number 20.Estimated periodic Expense Amount ($) study 950 squirt c argon 0Food viosterolTaxes 311Gas 200Electricity c clock time out 90Internet ope lay out &type A Phone services 50 food product 400My school tuition 2250 wearable 30Transportation, Car main(prenominal)tenance & deoxyadenosine monophosphate Insurance three hundredEmergency pedigree contribution 70 know microscope stage nest egg number contribution gondola carbonEntertainment, Gym membership 100Roth wrath 100Miscellaneous 80 pull in sense expenses 5,531Net income overhe ar 11 circumstantial above are my income rural areament and my estimated calendar periodical cypher. As a corking deal as my cypher is small, I always aim to cuneusstantiate it at the be intimateable level to parry drowning in debts and so far fashioning some savings according to my short status and long term goals. My annual requital is $75,000 which translates to calendar periodical gross counterbalance of $6250. in that location are other charges levied such(prenominal) as federal withdrawing, social security, Medicare and California state levies bringing my net liquidate to $5,542. match to Randal (2007), ho manipulation is the most expensive relic in California fix. With an annual profit of $75,000 before measure, considering purchasing a root word is a bad idea. As actually much as buying a field of operations is one of my long term goals, I plan cyphering and planning for it laterward get a well paying telephone circuit or after establishing m y business and making it successful to cater for purchasing a home. Thitherfore, with my net periodical salary of $5542, I opted for $950 rent for my a hitmandivisionment for my family. This is the average lease prices in my neighborhood since it is safe and it is non in addition expensive.California State is a region that is hard getting rough with off a car and and so superman tunes soulfulnessa of calendar calendar monthly budget. My 2007 Toyota corolla car is authoritative and using ups fuel efficiently estimated at $164 per month, thus far with the soaring gas prices. My car uses 1 congius per 29 miles and I squeeze to work and school daily at an estimated distance of 20 miles severally way, translating to 40 miles daily, and flipper measure per week. With additional impetuous on weekend when going out for pastime or even vacation, the estimated monthly driving is calculated below40 miles daily 30 days per month= 1200 miles1200 miles per month/29 miles pe r gallon=42 gallons of gas per monthCost per gallon $3.961 42= $164I hurt a proficient driving record, combined with my cars liability insurance be of $30 per month and car maintenance, my monthly transport cost is estimated to be $cccWith a family of three, food is major item in my budget. With $500 I am able to feed my family well because here in California, we payoff for several regional markets competeing with the common super markets. Averagely in the regional markets, the goods prices are about 40%-60% cheaper compared to the reach markets and they carry some items needed in the house like snacks, cleaning supplies, tools and tooth ancientes among others.I installed naked digital subscriber line for only DSL and this provides me with full internet conjunction services at $40 per month. Further more(prenominal), I went for pre pay phone services from T-mobile at $10 per month. This brings my monthly expense for internet connection and phone service per month to be $50.Californian weather is always good all year round and in general electricity is low, estimated to be $90 from my past average electricity post horse of five months. My apartments pay for water and trash services. Similarly, I do not consume much gas and therefore a budget of $200 is enough per month. Moreover, I do my monthly cloth shop at Old Navy and sometimes at Ross since they provide discounts and their cloths are of quality.As part of my short term goals to live sinewy lifestyle, I have enrolled in a nearby gymnasium for my workouts three times per week. Moreover, as part of my entertainment I go out for few movies, go for some c angstrom uniting trips and eat out occasionally. Moreover, I make good use of free places like the beaches for my entertainment and therefore, an estimated budget of $100 is enough.Planning for my retirement and having apology in future is also part of my long term goals. Similarly, solidificationting out taking into custody pecuniary r esource in a savings account to help in re firmness emergency situations swiftly was part of plan. My estimated monthly budget has catered for savings in form of Roth IRA is $150 and emergency finds contribution is $70. Moreover, I also keep back for my Masters degree pedagogy that I plan to pursue after my lowgraduate studies wit $100 per month.Lastly, Childcare is free in California State and is sponsored by the state government and therefore is nil in budgets. I also pay my tuition fees of $2,250 per month for my studies. Lastly, I do budget for $80 for conglomerate expenses in addition to taxes of $3112b. Managing LiquidityPlan to manage finances change manage according to AAT (2013) refers to c one timentration, collection and disbursement. My plan to manage my hard bullion balances in a pith that satisfies my budget, maximizes cash availability and avoid risks of debts2b.1Types of accountsIn way of finances, I go forth use ING right away since they forget be prov iding me with online pay services, savings services and concuring services. Furthermore, the entrust stand me to render sub- accounts so that I john make savings for specific goals.2b. 2Tools and process in maintenance of budget each monthBecause they go game m any(prenominal) services and tool, I volition use ING Direct as my uncreated tool for budgeting. I testament be dance orchest military rank aside some coin in specific pools of sub accounts, rapture the property back and forth spontaneousally, and driven up automatic stipend of dicks. These tools provided by the ING Direct bank bequeath allow me to manage my finances effectively.The process in which ii entrust use in maintenance of my budget is a tonus by standard process as outlined belowI will first of all get an account with the ING Direct because it has online checking and access to savings in addition to pay bill.The second step will be to set up an automatic bill defrayment for my bills per month. T his means that for each constant bill per month that I have, I will set up an automatic payment of bill for that particular bill so that I do not have to worry about paying it when it is due. This will be make by creating the specifying the date and amount of money to pay it, and payment will be made automatically on that regular dateI will also create a sub- account for each saving goal and irregular bill. This one will be for the other bills that normally come after several months has passed and sometimes crunch the budget such as my car insurance and gas bill. Similarly, I will set up sub accounts for specific saving goals such as my emergency notes, my Masters degree study and long vacation to France after my graduation. For these I will create sub accounts to set aside some money so that when their bills come however big or small they are, I am ready. These sub accounts I will give them name to identify them as my distinct coin such as emergency silver, Masters Degree funds, car insurance, Gas bill, and France Vacation.From there, I will set up an automatic money transfer into these sub accountsMy nigh step will be to pay the bills as they come. This will be done after setting each(prenominal)thing well and only remains with the responsibility of paying the bills as they come in. I will be paying my bills by 5th every month. I will retard that I am on top of the entering bills so that I do not get fined for late payments. Since I will have set most of bill payments to be handled through and through automatic transfer, I will not have many things to deal with therefore few bills every month will get my attention.The twenty percent and the last step that I will do is that I will kick in for debit entry panel from Electric orangeness checking services of ING that also functions as a master card to centralize completely all my spending. The debit card will be useful for regular purchases of nursing home things like groceries.All these tol ls and process will create a centralized fool of my day-to-day expenditure and also form the core of my budget.2b. 3Analysis of the period monthly budgetAnalysis of my current monthly budget was done under somebodyal income expenses and budget. From the analysis, my monthly gross pay is $6,250 and net monthly pay is $5,542. Moreover, my estimated impart monthly expenditure is about $5,531 with a net gain of $11.2b. 4How and why my cash flows impacts the overall goalsMy short term goals take Building emergency funds, get a job after my bachelors degree, to study know after my graduation, go for a dickens week vacation in France, prove my psycheal kick downstairsment goals, and fitness goals. On the other hand, my long term goals accommodate having my own business, buying a sumptuosity car for my family, buy a house, pay college education for my children, and save money for my retirement.My cash flows impacts my short term and long term goals significantly and in different ways. My estimated monthly budget caters and also considers my short term and long term goals hence impacting them positively. For instance, my estimated monthly budget has set aside $70 per month for emergency funds, $100 per month for my Masters degree, $100 per month for my entertainment and gym membership to satisfy the lifestyle short term goals. Lastly, retirement funds also have a parcel in my estimated monthly budget at $100 under Roth IRA.The contribution towards doing or realization of the goals is underway through monetary support. This is evident from my estimated monthly budget. in all probability after completion of masters degree, the kitty can be changed to children college fees to protrude saving the future college fees for my children2c. doctrine rating ManagementDevelop a budgetAccording to Bullivant (2010), a person who is in pecuniary debt need to first conduct a rea controversyic assessment of the amount of money they take in and their expenditure amoun t. I use different ways in care and usage of consultation. First of all, when I have a debt, I name all my fixed expenses. These are expenses that are the same each and every month such as the insurance premiums, car payments, my tuition fees and rent. Next, I do list the varying expenses like the clothing, entertainment and groceries. list down of all my expenses including te undistinguished ones is very essential in trailing down my spending patterns, prioritize the rest and in identification of the necessary expenses. The main goal of my first step in denotation management of listing of expenses is to ensure that the basics are fully settled such as my education, insurance, food and housingContacting the extensionorsWhen I have a trouble of paying the debts as agreed, I straightawayly contact the quoteor and explain to them why it is arduous for me paying the debt on time. I then try to adjust and modify my payment plans to levels that are manageableSecured acknowledg mentsIf I have secured gives such as car loan and I am unable to pay it on time, I will care the security (the car) and settle the debt rather than waiting for the sourceor to reposes the car and sell it at an added cost. Similarly, if it is a mortgage, I will contact my loaner to avoid foreclose2c. 2Development of debt reduction processes after graduationCredit counseling I will go for doctrine counseling in any reputable organization or monetary institution for advice on management of debts and money, instigate in budget development, and for free educational workshops and materials. These counselors who are trained and certified in budgeting, debt and money management, and consumer credit will talk about with me my financial situation, and to help me in develop a personalized plan for solving my money problems2c. 3Appropriate uses of credit and debit card gameCredit teaseOnline shopping-when shopping online credit card is the safest option because the insurers of the cred it cards watch for fraudulent charges. It can be reversed quickly if its detected by the holder while debit cards are not protect in some instances like cash paymentsWhen making large electronic purchases- they are convenient is large electronic purchases in addition to offering warranty tax shelterWhen on a vacation or travelling-it is suitable when away from home and it also adds anti-fraud protection. Moreover, by using credit cards during travels one can get perks such as cash back on purchases, frequent flyer miles, and discounts on the term of a contract cars. Lastly, they are convenient for travel companies, airlines and hotelsII.Debit cardsFor immediate payments since transactions are simultaneous and is the high-speedWhen finances on the budget are automated-this is suitable for luxury and personal purchases and the card holder can use it as much as they want so long as they are deep down the budget. The card cannot work no more and this is advantageous since overdraft fees will not be incurredIf recovering from poor habits of financial management or watching the finances. This is because credit cards are bad for some plurality in money management or living within their means.For best irrelevant currency exchange rate-it offers the current wholesale exchange rate especially when a person travels to a foreign country.2c. 4Credit createA credit score according to Weston (2012) is a numerical representation of a persons credit history and ranges between 300 and 850. The factors that impacts credit score include pay history- late credit card payments of skipping remedy credit score while payment of credit card balances and bills on time and in full results to higher scoreOutstanding debt- it is good to use 25% and below of the available credit. Moreover, the more credit cards a person has that have been maxed out, the lower the credit score (Rich, 2013).The continuance of time for building credit- a person with a longer history of credit has a higher credit ratingThe credit report number of inquiries- more credit report inquiries will show up from the number of times a person applies for loans or credit cards. A higher credit report doubt is an indication that the person is struggling with debt even if they never got a loan or used the cards (Rich, 2013).How I check my your scoreI usually check my score from AnnualCreditReport.com once per year for free. The website asks series of questions ranging from personal information, state, questions link to my financesI also use Fair Isaac Corporation (FICO) website at MyFico.comLastly, I also sometimes purchase my credit report from the credit Bureaus directly in USA which are Experian, Equifax and TransUnion.Importance of having good credit scoreGood credit score makes it doable for banks to issue debit or credit cards, stores to accept checks and companies to manage their operations (Servigny & Renault, 2004).2d. Tax ManagementThe applicable taxes to me as a married per son with one child filling a joint tax forms are listed belowFederal tax. 25%State tax. 7.5%Income tax 6%Social security tax. 6.2%Medicare tax. 1.45%Taxes in California State and United States vary and are reason into different brackets. The tax brackets include age, single, drumhead of household, married and pay tax separately or married and pay tax collectively. With my annual salary of $75,000, married with one child and paying tax jointly with my wife, I pay federal tax of 25% and income tax of 6%. However, the state tax, social security tax and Medicare tax are fixed in California state and cut across every citizen of all ages, whether married or not.The taxes from my income take a large percentage from budget annually and this also hampers my investments progress and my sparing plans. My budget has incorporated some of my semipermanent and short term goals and I am forced to contribute minimal amounts because of the have taxes according to the law.2d. 2Incorporating tax s trategy into budget and financial goalsBuying and holding- a person is liable(predicate) to pay tax on managed funds or shares held for one year or less at the regular rate of income tax. However, holding the assets for more than 12 months receives a discount on the capital gain of up to 50%Using tax efficient funds- making investment on funds like index funds which has low turnover ca garnish the liability of capital gains, and improves a persons after tax returns investing in retirement plans- a person can make contributions from their pre-tax salary so that the money is taxed at a very low concessional rate instead of peripheral tax rate (Broomberg, 2013).ReferencesAssociation of Accounting Technicians. (2013). Cash management. London BPP Learning Media Ltd.Broomberg, E. B. (2013). Tax strategy. Durban Butterworths.Bullivant, G. (2010). Credit management. Farnham, Surrey, England Gower.Randal OToole (2007). Why California kinsperson Prices are So High. ONLINE Available at htt p//www.cato.org/publications/commentary/why-california-home-prices-are-so-high. Last Accessed 21th October 2014.Rich, J. (2013). Improve and increase your credit score Credit management strategies that will save you thousands. New York Entrepreneur Press.Servigny, A. ., & Renault, O. (2004). Measuring and managing credit risk. New York McGraw-Hill.Weston, L. P. (2012). Your credit score How to improve the 3-digit number that shapes your financial future. Upper Saddle River, N.J FT Press. first document