Budget Depression
Probably you identify with thousands of others who say “all the monetary advice I ever get to read emphasizes on having a budget. I endeavor to make realistic budgets each month, but they aren’t practical at all. This is because the figures never appear to equal what I actually spend. I’m disturbed with budgeting and almost giving up. Is there anything I’m doing erroneously?
A lot of people today begin budgeting with high promises and expectations, but will only take two weeks for the plan to be dumped. Towards the end of the month, they frantically look forward to their end-month paycheck, in the process resolving again to right their finances, and the cycle continues, month in month out.
Budgeting is the key to future financial security and freedom. Thus, budgeting is very vital for everyone who is not living for today but looking further ahead. A lot of people detest budgeting; citing that its like allowing figures dictate their lives, thus creating an image of ‘tightening their belts’. How actually does a budget work? It simply controls your expenditure, allows you to select how much money you allocate for yourself, and indicates how much money you require to be able to live your dream life.
How do I make a practical budget?
- Write down all the ‘mandatory’ monthly expenses such as food, transport, rent or mortgage, loan repayments and life/or and health insurance.
- Estimate all inevitable expenses, but don’t occur monthly such as car insurance, property tax, car servicing, school fees and supplies etc.
- Set logical costs limits on expenses that can fluctuate such as gifts, clothing, personal care and entertainment.
- Set allowances for contingencies that may happen such as home repairs and medical bills.
- Note down everything that you would like, but are financially incapable now such as charitable contributions, kids college savings, retirement investments, annual vacations etc.
- Calculate the average monthly amounts of the above expenses, i.e. if your annual car insurance is $24,000, divide by 12 months to attain an average figure.
Calculating these figures shows you what it costs for you to live for a year, derived at by breaking down into a monthly amount.
After listing down all the expenses, take a look at your earnings. If you earn on commission basis, or have an erratic income, estimate the lowest possible amount you can take home with you. Deduct the total monthly expense figure you came up with whereby the difference will either be your budget surplus or deficit.
Optimistically you get a budget surplus; it should be invested wisely, lest you end up wasting it. If it is a deficit, no need to give up, the deficit tells you just how much more you need to earn, or how much you should cut down your spending by to avoid worries of ruining your budget.
That said, you have an abundance of choice, weigh down all options to increase your earnings or simply cut down on the expenses you deem unnecessary. Remember a budget will not work if you fail to account for all your expenses.
