The budget can be a complicated part of preparing a proposal. It should be done carefully and accurately as it is a direct reflection of the work being proposed and of your knowledge of what is required to accomplish that work.
Most sponsors provide guidelines for budget preparation and many provide forms for the submission of budget information.
For multiple-year proposals, a budget for each year is usually expected, as well as a cumulative budget. Consideration should be made for cost increases and inflation from one year to the next. ORS suggests that unless the PI has access to exact costs for the "out" years of a project, an inflationary factor of 3% be used. If the NIH Modular Grant Application and Award process is applicable, inflationary factors are not used.