How to Create a Cash Budget

Trying to maintain your monthly expenses along with occasional annual or quarterly expenses while saving for a rainy day can be challenging. A cash budget is used to look at expenses over a period of time when various income payments are made. A good cash budget helps a person look at expenditures and also look for areas to reduce expenses to divert income to budget-line items. A simple cash budget can help you reach your long-term financial goals.


Define your time frame for the budget. Assume for the example you are using a 12-month time frame.


Gather all information regarding your net annual income. You can use a previous year's tax return or annualized monthly income by multiplying it by 12. If you monthly net income is $4,000, your annual net income is $48,000.


Itemize and list all monthly expenses. Add all expenses together and write this number down.


Write down annual expenses that occur occasionally, such as taxes, insurance premiums or car registration. Add these expenses together, write it down and then add it to the other monthly expense total.


Subtract your total expenses from your total net income. If your calculation results in a negative number, you are not in a cash scenario and require credit to meet annual expenses. If the number is positive, you are operating within a cash budget.


Define your goals for your annual budget, including retirement savings and general savings. If your cash budget is not leaving enough to meet the savings needs, look at expenses and how you can reduce them.


  • When first starting a cash budget, be prepared for emergency adjustments for unexpected expenses, such as medical expenses.


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