A Good Budget Leads to More Available Income
Creating a budget is easier said than done. It requires keeping good records, balancing your checkbook and organization. Many are not motivated to do it or simply do not like to work with numbers.
But everyone will find it in their self-interest to make the effort to outline their expenses against income even if it requires getting someone else to help undertake the task. The budget should include monthly income and outgo, projections of expected increases and decreases and some buffer for the unexpected.
A spreadsheet can be helpful and can be easily obtained free of charge. However, if this approach is intimidating, pen and paper will work just as well.
Whether you are using a spreadsheet or a notepad, here is an easy method to follow: Separate your page into two columns, one for income and one for expenditures. Expenditures should include regular monthly bills, amounts spent on food, transportation and other routine expenses. If possible, include an extra 10% for miscellaneous expenses that you could not anticipate.
Now, for an important add-on task that too few undertake: project different scenarios. Make another budget (an imaginary one) that shows monthly costs, income and the difference between the two… except:
Exclude monthly credit card interest amounts. Exclude auto loan interest. Exclude 25% of any ‘impulse buy’ amounts. Then sum the total of those three.
Possibly non-essential expenses make up only a small portion of your total expenditures. However, even if the total is a minimum 10% by eliminating them you can notably increase your available income.
No one but you, being as realistic as possible, can decide whether that 10% overhead you pay is worth what you get in return - having certain items earlier than you would by saving for them. But, consider this: saving that 10% APR paid on $2,000 for one year is: $110. And many people pay only the minimum monthly payment, which amounts to much more. That’s $110 you are paying solely to have something costing $2,000 a year earlier.
Your spending habits are your decision. Having a good budget will help you decide how to use your income wisely.
