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.
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.
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:
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.
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.
