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  • Writer's pictureRosen Valchev

Income Planning Sheet- Everything You Need to Know

Updated: Aug 27, 2021

Confucious once said - “A man who does not plan long ahead will find trouble at his door.” and such words of wisdom are hardly deniable.

This saying applies to most aspects of our life. One area that is strongly affected by our planning (and execution) efforts is our personal finance. And many experts say that coming up with a plan is crucial for our financial success.

There are just too many examples of people who experience financial struggles when a personal finance plan hasn’t been set. To help you avoid pitfalls and be consistent with your efforts on your path to financial freedom, we created the Income Planning sheet. Without further ado, let’s examine how it can help you plan your brighter financial future.

How Does the Income Planning Sheet Function?

Unlike most other personal budget excel templates in Nordveld Flow that are automated (Financial Dashboard Sheet, Net Worth Sheet, Profit and Loss Sheet, etc.), the Income Planning sheet requires more active work on your end.

Yet, you shouldn’t worry because the process is pretty streamlined. You can also use data from other sheets to fill in the Income Planning sheet. Moreover, once you write down the info, you wouldn’t have to update it very often as you need to do in many other personal finance apps. We will show you how to fill in this information below. Let’s begin!

Set Your Income Planning Sheet For Success

The purpose of the Income planning sheet is to help you create an overview of your current financial behaviour. Then set your desired behaviour and finally, compare both.

In this way, you will have a much clearer picture of your current financial habits. Furthermore, you will be able to identify areas in your financial behaviour that you need to work on and improve. On the right side of your Income Planning sheet, you will see short instructions on how to fill in the blanks. After you read these instructions, ignore the pie charts below for now and focus your attention on the left side where it says “Income Streams”.

Filling In Your Income Streams

This is the place where you should write down all your financial cashflows by giving them a name and entering the amount they earn you. For example, apart from your job, you could also be generating money from freelance work or selling some tasty cookies to friends or pretty much, anything else. Like this:

It’s very important to note that you want to enter the net amount you earn. When talking about salary, it’s easy - just enter the amount you receive in your bank account.

Yet, when filling in your freelance, consulting or other income streams, don’t forget to deduct any corporate(or another) tax you may owe at the end of the fiscal year.

Also the amounts you enter should be for one month. If you are not sure how much you make per month, let’s say with your freelance side gigs, just figure out your total freelance net income for the last year and divide it by 12. Assuming you made 8,400€ net, divided by 12, this equals 700€ a month.

Filling In Your Periodic Expenses

When budgeting, you can segregate your expenses into 2 main groups. The first is periodic expenses, which are typically monthly fixed costs, like rent, subscriptions, mortgage payments, loan instalments, you name it.

While you are filling this category, it’s also important to consider any expenses that don’t occur each month but rather quarterly, every 6 months or annually. The frequency doesn’t actually matter.

This time, however, you want to figure your annual expense and divide it by 12.

Let's say you pay 120€ for car insurance quarterly. Figure out the annual cost - 480€ in this case (120€ x 4). Then divide it by 12 to find the monthly cost - 40€ and write this down.

Filling In Your Variable Expenses

The second group of expenses are variable expenses. You can find this field below the pie charts in the Income planning sheet. Again, these typically occur on a monthly basis but are rather fluctuating. Examples are grocery store expenses, electricity and heating bills which usually go up during winter, holiday expenses and more.

What you want to do with this category is to try coming up with an average monthly estimate of these expenses. For instance, you can find the total amount you spend on groceries in the last year and divide it by 12. The same goes for less frequent variable expenses like money spent on holidays.

There is a hidden benefit to this tab. When you figure out these amounts you will be able to identify whether you tend to spend above or below average on variable expenses, in certain periods of time, which opens room for improvement.

Filling In Your Fixed Savings and Fixed Investments

Arguably the most important part of your income planning is understanding how much you save and invest on a monthly basis. The fixed savings tab is a place where you want to write down the amount from your income you are able to set aside each month. A great piece of advice is to set aside this amount before you spend any of your hard-earned money. In the personal finance field, this golden rule is referred to as paying yourself first. Next, your fixed investments tab refers to the amount of money you invest on a monthly basis. In things like pension funds, ETFs, mutual funds, stocks, bonds or other assets. If you don’t have the habit to save and invest monthly but do it less frequently, it’s ok. You can still calculate the total and divide it by 12.

However, you should try to make this a habit as soon as possible and save and invest every month. This is probably one of the most sustainable ways to build your wealth over the long run. And if you use Nordveld Flow as a family budget app it's still a good idea for everyone's savings and investments to go in separate accounts. That's how every family member will have autonomy but you will still have a holistic view over your entire family budget and goals.

Current Income Spending and Desired Income Planning

Finally, when you have filled in all information, you can return to the top right side of the page and view the pie charts.

The current income spending chart shows the way you are currently spending your money expressed in percentages and how different categories correlate. Above, in the desired income planning chart you have the ability to choose between three options by clicking on the arrow - Relaxed, Balanced and Ambitious. Each option suggests different spending behaviour and you can choose a type depending on your personal preferences. In almost 100% of cases, your desired income spending will differ from your actual income spending.

To help you see the gap, all tabs (except the income stream tab) have a target field. The amount in this tab is calculated based on your desired income planning and your level of income. It shows you the parallel between the amount of money you are currently spending/saving /investing and the amount of money you should be spending/saving /investing to attain your goal.

Remember that the income planning options are just a friendly suggestion. Things that have worked well for others. Yet, certainly not financial advice. You can always come up with your own income planning structure, which will defer from the suggested models.

So there you have it. With your new actionable plan, and probably the best budgeting software you are prepared to go ahead and claim your brighter financial future. And Nordveld Flow will help you achieve that goal. Effortlessly.

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