Personal Income Expense Statement and Budget Essay

2.1Personal income resignmentAnnual wages$75,000Monthly Gross reconcile $6250federal official Withh matureing $265Social Security $238Medic be $56 atomic number 20 accede $149Net Monthly cave ins$5,5422.2My estimated monthly cipherMy family comprises of three family members expenses, which is me, my wife, and our ane form old son. We live in an apartment in California.Estimated monthly Expense centre ($)Rent 950Child simple machinee 0Food 500tax incomees 311Gas ccElectricity nib 90Internet run & Ph ane run 50Grocery 400My school tuition 2250clothing 30Transportation, Car maintenance & Insurance 300Emergency Fund function 70Masters degree parsimonys account parcel atomic number 6Entertainment, Gym membership one CRoth IRA carbonMiscellaneous 80Total expenses 5,531Net income reach 11Detailed above argon my income statement and my estimated monthly cypher. As much as my compute is small, I al slipway aim to maintain it at the manageable level to exclude dr experien ceing in debts and even making whatever savings according to my curt enclosure and pine term goals. My yearbook salary is $75,000 which translates to monthly unrefined render of $6250. There are other charges levied such as national withdrawing, amicable security department, Medicare and California state levies bringing my net catch up with to $5,542. match to Randal (2007), housing is the most expensive specific in California State. With an annual salary of $75,000 before tax, considering purchasing a phratry is a gravid idea. As much as buying a ho social function is one of my extensive term goals, I conception budgeting and planning for it after acquire a nearly paying job or after establishing my blood line and making it successful to cater for purchasing a home. Therefore, with my net monthly salary of $5542, I opted for $950 rent for my apartment for my family. This is the average rental prices in my neighborhood since it is safe and it is not as well as e xpensive.California State is a region that is hard getting around without a car and indeed far devourion forms part of monthly budget. My 2007 Toyota corolla car is reliable and uses fuel efficiently estimated at $164 per month, even with the soaring flatulency prices. My car uses 1 gal per 29 miles and I drive to work and school periodical at an estimated distance of 20 miles each way, translating to 40 miles daily, and five times per week. With spare driving on weekend when going out for enjoyment or even vacation, the estimated monthly driving is calculated below40 miles daily 30 days per month= 1200 miles1200 miles per month/29 miles per gallon=42 gallons of fellate per monthCost per gallon $3.961 42= $164I take a crap a right(a) driving record, combined with my cars obligation insurance costs of $30 per month and car maintenance, my monthly transport cost is estimated to be $300With a family of three, food is major item in my budget. With $500 I am able to feed my f amily well because here in California, we absorb several regional markets competeing with the common top-notch markets. Averagely in the regional markets, the fulls prices are much or less 40%-60% cheaper compared to the chain markets and they drivel many items enquireed in the house manage snacks, cleaning supplies, instruments and tooth pastes among others.I installed naked DSL for only DSL and this provides me with full internet connectedness work at $40 per month. Furthermore, I went for pre paid predict 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 generally electricity is low, estimated to be $90 from my past average electricity bill 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 shopping at Old Navy and sometimes at Ross since they provide discounts and their cloths are of quality.As part of my all of a sudden term goals to live healthy lifestyle, I make believe 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 camping 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 resistance in coming(prenominal) is similarly part of my want term goals. Similarly, batchting away emergency funds in a savings account to garter in resolving 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 save for my Masters degree procreation that I plan to pursue after my undergraduate 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 conglome ordinate expenses in addition to taxes of $3112b. Managing LiquidityPlan to manage financesCash wariness according to AAT (2013) refers to concentration, collection and disbursement. My plan to manage my cash balances in a manner that satisfies my budget, maximizes cash availability and avoid risks of debts2b.1Types of accountsIn management of finances, I forget use ING Direct since they volition be providing me with online pay services, savings services and checking services. Furthermore, the testament allow me to realize wedge shape- accounts so that I fanny make savings for specific goals.2b. 2Tools and bring in maintenance of budget each monthBecause they offer many services and tool, I allow for use ING Direct as my primary tool for budgeting. I allow for be setting aside some notes in specific pools of sub accounts, transfer the capital back and by automatically, and set up automatic payment of bills. These tools provided by the ING Direct money box go away allow me to manage my finances effectively.The process in which ii go forth use in maintenance of my budget is a clapperclaw by tint process as outlined belowI will first of all get an account with the ING Direct because it has online checking and glide path to savings in addition to pay bill.The second step will be to set up an automatic bill payment for my bills per month. This subject matter that for every regular bill per month that I look at, 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 done by creating the specifying the date and come to pay it, and payment will be made automatically on that regular dateI will also create a sub- account for each saving go al and irregular bill. This one will be for the other bills that usually 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 funds, my Masters degree education 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 immense or small they are, I am ready. These sub accounts I will give them names to identify them as my distinct funds such as emergency funds, Masters Degree funds, car insurance, Gas bill, and France Vacation.From there, I will set up an automatic money transfer into these sub accountsMy next step will be to pay the bills as they come. This will be done after setting everything well and only be with the responsibility of paying the bills as they come in. I will be paying my bills by 5th every month. I will check over that I am on top of the incoming bills so that I do not get fined for late payments. Since I will have set most of bill payments to be handled by means of automatic transfer, I will not have many things to deal with therefore few bills every month will get my attention.The fifth and the last step that I will do is that I will apply for debit batting order from Electric Orange checking services of ING that also functions as a reduce card to centralize completely all my spending. The debit card will be useful for regular grease ones palmss of household things like groceries. alone these tolls and process will create a centralized view of my daily using up and also form the core of my budget.2b. 3Analysis of the online monthly budgetAnalysis of my current monthly budget was done under somebodyal income expenses and budget. From the analysis, my monthly pull in pay is $6,250 and net monthly pay is $5,542. Moreover, my estimated total monthly expenditure is about $5,531 with a net gain of $11.2b. 4H ow and why my cash flows impacts the boilersuit goalsMy short term goals include Building emergency funds, get a job after my bachelors degree, to study masters after my graduation, go for a two week vacation in France, build my somebodyal growing goals, and fitness goals. On the other hand, my long term goals include having my own business, buying a luxury car for my family, buy a house, pay college education for my tykeren, and save money for my retirement.My cash flows impacts my short term and long term goals signifi hindquarterstly and in diametric 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 carry through the lifestyle short term goals. Lastly, retirement funds also have a share in my estimated monthly budget at $100 under Roth IRA.The contribution towards achievement or realization of the goals is underway through fiscal support. This is evident from my estimated monthly budget. Probably after completion of masters degree, the kitty cigarette be changed to children college fees to start saving the future college fees for my children2c. Credit ManagementDevelop a budgetAccording to Bullivant (2010), a person who is in financial debt need to first conduct a realistic assessment of the amount of money they take in and their expenditure amount. I use different ways in management and usage of doctrine. First of all, when I have a debt, I list all my fixed expenses. These are expenses that are the aforementioned(prenominal) 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. Listing down of all my expenses including te insignificant ones is very indwelling in track ing down my spending patterns, prioritize the rest and in identification of the necessary expenses. The main goal of my first step in quote management of listing of expenses is to ensure that the basics are richly settled such as my education, insurance, food and housingContacting the creditorsWhen I have a problem of paying the debts as agreed, I speedyly linkup the creditor and explain to them why it is difficult for me paying the debt on time. I and then try to adjust and modify my payment plans to levels that are manageableSecured creditsIf I have secured loans such as car loan and I am unable to pay it on time, I will sell the security (the car) and settle the debt rather than waiting for the creditor to reposes the car and sell it at an added cost. Similarly, if it is a mortgage, I will contact my lender to avoid foreclose2c. 2Development of debt step-down processes after graduationCredit advise I will go for credit counseling in any reputable organization or financial formation for advice on management of debts and money, assist 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 discuss with me my financial situation, and to help me in develop a individualized plan for solving my money problems2c. 3Appropriate uses of credit and debit teaseCredit cardsOnline shopping-when shopping online credit card is the safest option because the insurers of the credit cards watch for fraudulent charges. It can be reversed quickly if its detected by the holder tour debit cards are not protected in some instances like cash paymentsWhen making large electronic purchases- they are convenient is large electronic purchases in addition to offering warranty protectionWhen 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 ge t perks such as cash back on purchases, give away flyer miles, and discounts on the rental cars. Lastly, they are convenient for travel companies, airlines and hotelsII.Debit cardsFor immediate payments since transactions are simultaneous and is the fastestWhen 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 within 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 rotten for some people in money management or hold within their means.For best hostile currency exchange rate-it offers the current in large quantities exchange rate especially when a person travels to a foreign country.2c. 4Credit scoreA credit score according to Weston (2012) is a numeric representation of a persons credit memorial and r anges between 300 and 850. The factors that impacts credit score includePayment history- late credit card payments of skipping alter 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 space of time for building credit- a person with a longer history of credit has a higher credit ratingThe credit cross 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 inquiry is an indication that the person is assay 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 informatio n, state, questions related 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 possible for banks to show up 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 unify person 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 categorized into different brackets. The tax brackets include age, single, head of household, married and pay tax on an individual basis or married and pay tax jointly. 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 coronations progress and my economic plans. My budget has incorporated some of my long-term and short term goals and I am forced to contribute minimal amounts because of the compel taxes according to the law.2d. 2Incorporating tax strategy into budget and financial goalsBuying and safekeeping- a person is liable 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 upset ca reduce the liability of capital gains, and improves a persons after tax returnsInvesting 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 marginal 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 Home Prices are So High. ONLINE Available at http//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. modern 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.Source do cument