The 15 Minute Annual Budget
A simple approach to budgeting on Google Docs
Happy Thursday, and welcome to 2022!
There’s no shortage of budgeting tools that I’ve used and would recommend to some people, but they all share a fundamental problem in that they assume you want to actively manage a budget.
There’s no doubt that these tools are more precise, but I believe there’s more value unlocked when going from no budget to a one-time rough estimate versus the estimate to a super-precise and actively managed ledger.
Enter my 15 minute budget estimator:
Your mission, should you choose to accept it is to create a budget.
…but I don’t need a budget —> even Bezos needs a budget
…but budgeting takes too long —> this only takes 15 mins, give it a shot
…but my income is variable —> no worries, we can estimate…
Where do we begin? Open the template here and go to “File —> Make a copy” so you can edit a private version for yourself. Now, we need to ensure we gather the inputs:
Expenses | We can use our trailing twelve months (TTM) of expenses. Since ‘21 just ended we can leverage year-end summaries to make this easy:
✂️ Shortcut, simply download year-end statements across all your banks and credit card companies for 2021 totals. Be mindful of any new expenses or one-time purchases from ‘21 you don’t anticipate returning in ‘22.
Tax-Advantaged | Unless you have high-interest debt or other urgent expenses due, it’s usually worth contributing to employer-subsidized tax-advantaged investments. Here’s a quick rundown of each with 2022 US limits:
Retirement savers with a 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan can contribute up to $20,500 in 2022, a $1,000 increase from the $19,500 limit in 2021.
401(k) savers ages 50+ can make a catch-up contribution up to $6,500 in 2022 (no change from 2021), for a total contribution of $27,000. (source)
Lastly, it’s also worth considering whether or not your employer offers a savings match, which we’ll document under Income.
💰 Bonus, for those interested in maxing out tax-advantaged savings and investments, you should also consider:
Mega Back Door Roth’s, allowing an additional $40,500 (more info)
529 Savings Plan for Education, all funds are earmarked for education but plans are transferable to children even if the children don’t exist yet. In NY you can contribute $5,000 which is deducted from your state income taxes (more info)
Non Tax-Advantaged | This is a place for all other investments. I’m a big fan of data and data shows that for most of us Dollar Cost Averaging is the best way to invest across volatile assets (like stocks and cryptocurrency). It also allows us to think about portfolio construction on an annual basis, helping push us towards making longer-term bets.
For stocks, I prefer robo-advisors like Wealthfront
Income | You’re almost there, last we have income. Simply plug in your annual estimate using 2021 as a compass and be sure to add any side-hustle and interest income on top of that:
Ecommerce sales (Etsy, eBay, Shopify, etc)
Best of all, interest earned passively
💰 Bonus, we’ll talk more about earning interest on stocks and crypto in a future issue!
HOORAY! You’re all done. What did you learn?
Besides a refreshed understanding of your expenses, you can start to see which levers you need to push/pull in order to get closer to your saving and investing goals.
If you’re feeling really inspired, why not take it to the next level and try plotting out your next 5-10 years?
If you fail to plan, you plan to fail. - King Richard
For those that haven’t seen King Richard on HBO, I can’t recommend it enough. It’s the story of Venus and Serena Williams through the eyes of their father and it was the most inspiring movie I watched in 2021.
Until next Thursday!