What is an Income and Expense Evaluation?

An income and expense evaluation are very similar to a monthly budget in which you calculate your expenses and income based on a certain time frame. You can calculate your income and expense based on an annual time period or a quarterly or even monthly. Whatever you think aligns with your goals and will be most beneficial to your lifestyle and how you spend money. However, most often it is calculated on a monthly basis and this more accurately lines up with consumer credit industry standards.

You can call it by other names but this is in essence known as a budget.

The Best Way to Calculate an Average

Many consumers chose to calculate the average monthly expenses based on an annual budget. This is simply due to the fact that many consumers have to pay taxes and have other annual or semi-annual expenses.

Once you have a monthly average of your income and expenses you will have a more clearly defined pattern and monthly process to go based off. Averages simplify the process for you and make things more round about so that you can get a more effective way of managing your finances.

Debt to Income Ratio

Once you have an income and expense valuation performed you can then use the information attached to calculate a debt to income ratio. You simply take the monthly expenses divided by the monthly income. Then you take the fraction and simply multiply it by 100 to receive to get our Debt to income percentage. For example, if your gross monthly income is $4,000 and your monthly expenses amount to $2,000 your debt to income ratio is 0.50, so you have a 50% DTI.

Ways to Improve Budgeting

The most popular way people chose to improve their budget is by typically reducing monthly expenses since getting a second job or starting something that generates a second source of income can often take quite a bit of time. Due to this, the easiest and quick way to improve a budget is often by cutting out unnecessary things and looking to cut costs where ever possible.

Ways to Improve Income

People make more money a multitude of ways, some do so by investing and saving more money. Others do so by picking up a second job or another source of secondary income. Otherwise besides doing extra work or receiving a source of passing income there isn’t much that can be done to earn more money.