A Good Budget Leads to More Available Income

It might seem that developing a budget should be an elementary task. But many people are simply not inclined to use spreadsheets, balance checkbooks or lay out a formal budget. Whether by nature, or as a result of a reaction to public school mathematics training, some people just aren’t ‘number people’.

Even if a person is not good at budgeting, the benefits make it worth the effort, even if it requires getting outside help. A good budget accounts for monthly income and expenditures, and anticipated changes in these. It is also important to plan for unanticipated changes.

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.

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.

Your spending habits are your decision. Having a good budget will help you decide how to use your income wisely.