A Good Budget Leads to More Available Income
September 12, 2008
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.
Divide the spreadsheet or page into two columns. In one, list income, in the other write down all monthly costs. In the costs column include all major regular bills, groceries, gasoline, etc. Then add at least 10% for unexpected expenses, if you can.
To get an idea of how you can increase your available income, make another “hopeful” budget. List your income the same as in your real budget along with your monthly expenses that are unchangeable. What will be the difference in your “hopeful” budget?
Your expenditures column will not include any loans or credit card payments that you hope to eliminate. Also this budget will show a reduced amount allotted for purchases made on a whim. The total of these excluded items is a good representation of the amount you could potentially save each month.
These three represent the amount you could conceivably avoid paying every month. If the total is even as low as 10% of your monthly expenses (and for some it’s higher), you are paying a substantial amount of your income to charges that could be avoided.
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.
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