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.
Of course, reducing the amount you allow for non-essentials will require some sacrifice. Only you can decide if it is worth the effort to save for an item rather than charging it and paying interest. However the savings on interest charges makes it worth considering. Even a relatively small credit purchase can accrue interest of $100.00 or more in one year and even more if only minimum payments are made. Having an extra $100 in your pocket may make it worthwhile to consider paying cash.
Only you can decide which is worth more to you, but developing a budget will help you make those decisions rationally.
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