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.
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.
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.
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?
Exclude monthly credit card interest amounts. Exclude auto loan interest. Exclude 25% of any 'impulse buy' amounts. Then sum the total of those three.
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.
