We all have champagne wishes and caviar dreams, but in this economy, we’re lucky if we have money enough to enjoy wine coolers and cheeseburgers. If you want to survive rampant inflation and the imaginative wisdom of the federal government, then you need to create a budget that is realistic and doable.
A budget begins with examining your current finances. Start by calculating your income. This is easiest when you have set paydays throughout the month and know exactly how much money is coming in. If your income is inconsistent, such as income generated through part-time work or freelancing, you will have to estimate your monthly income – but be conservative with your estimate. Approximate your income at a level lower than what you believe it will be, as it is always better to have a little extra at the end of the month than not enough.
Once you know how much money you have to work with, it’s time to look at your monthly bills. First make a list of your regular month bills: rent or mortgage payment, car payment, utilities, insurance, etc. While you should be conservative with income estimates, you need to estimate bills at their highest level. For example, budget for your winter heating bill even in the summer, then you’ll have the extra money for other summer costs.
Do the math: subtract your bills from your income. Ideally, you’ll have money left over. If not, then you either need to increase your income, which can be difficult to do, or lower your monthly bills. If you’re having difficulty paying your bills each month, start identifying those bills that you can eliminate:
- Cable television (Switch from high-end cable or satellite to a free or low-cost streaming service)
- Land line (especially if you use your mobile phone all the time)
- Cell phone (eliminate the service or switch to a lower plan or a prepaid phone)
- Dining out (cooking at home is always less expensive)
Once you have developed a realistic monthly budget, write down the due dates of all of your bills and designate which paycheck will be used for which bills. If the majority of your bills are all due around the same time, you will need to save money from the previous paycheck to cover them or pay them early.
The goal of a budget is to ensure that you can pay all of your monthly expenses, but more importantly, a budget will help you handle those unexpected expenses. You never know when your car will break down or when you will miss work due to illness. It is all about being prepared.