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.
If you feel uncomfortable using spreadsheet software – which is available for free these days either through Open Office or Google Docs & Spreadsheets – at least jot down some figures on a legal-sized pad.
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?
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.
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.