This template allows you to estimate your annual spending and the total amount of savings you can make today using just 13 months of bank statements. There is no need to calculate a detailed budget or do detailed projections. Here is the step-by-step process to get a good estimate of the expenses without collecting all the details of every single bill you paid or every transaction you made.

Step-by-Step Method to Estimate Expenses

1. We assume that you have a main bank account in which you deposit your salary and which is used for most of your expenses. Collect one year and one month (13 months) of statements for this account.
   
   
2. Now fill the balances for each month in the template.
   
   
3. You need to classify all outflows as ‘asset purchase’ (that is, ‘investment’) or ‘expense’. This needs a little explanation. The money spent on an asset purchase or an investment will eventually come back when you liquidate the asset. For example, if you transfer money to your brokerage account, it is not an expense—it is an investment. Similarly, if you pay down payment on an apartment, it is not an expense, it is building an asset which one day you can sell and receive the value in your bank account. On the other hand, if you pay for a holiday, it is an expense. Since there are a lot more expenses than investments, you need to only identify investments and add them up for each month. Everything else is an expense.
   
   
4. Similarly, identify and classify inflows of money from investments as ‘asset sale’. If you get your salary, it is a regular income; however, if you sell your motorbike and get money, that is ‘asset sale’. Any return from investment account—like dividends or interest—are also a partial asset sale.
   
   
5. Now you should have five numbers for each month:

• • • Balance at the start of the month (B1)
    • Income (I)
    • Asset purchase (P)
    • Asset sale (S)
    • Balance at the end of the month (B2)
      
      

6. You can determine the estimated expenses using these five numbers. You start with the balance at the start of the month (B1) and add income (I) and asset sale (S). This is the total inflow. Now you reduce it by asset purchase (P) and the balance at the end of the month (B2). The residual is your expense.
7. Expense E = B1 + I + S – B2 – P
   
   
8. Add the Expense (E) for every month for a year. This gives you a good estimate of your annual expenses.

The difference between your total income and total expense is your savings.