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A budget is nothing more than you telling your money what to do. You are the general and your money is the buck soldier standing by awaiting your orders.
Remember, money serves you. You do not serve money.
The technical definition of a budget is an estimate of income and expenditures for a set period of time.
Basically, a budget is an estimate of income and expenses. This means a budget is fluid. It is not rigid and restrictive as most people think.
A budget is a financial plan.
Most people start out as young adults without a financial plan. They get a job and start making money. As they make money, they start spending it without a budget in mind. This is why they end up having financial issues… they did not have a plan.
Okay, let’s say you did not budget in the beginning. We cannot go back and change that. We must look ahead. The first thing we must do is to make an assessment of our situation.
You have to know where you are in order to get to where you want to go.
Take out a sheet of paper and write down all the monthly net income that comes into your household and tally it up.
Mark the sum of this money as Monthly Net Income.
Next, write down all your monthly expenses. Write down what they are and their amounts. If you have an expense that is paid quarterly or semi-annually, break the expense down by its monthly amount.
For example, if your car insurance is $600 every six months, you will break it down and list it as $100 a month even though you pay it semi-annually.
Add all your monthly expenses and mark the sum of these expenses as Monthly Net Expenses.
Subtract your Monthly Net Expenses from your Monthly Net Income and what is left over is known as cash flow.
Cash flow can be either positive or negative.
In this training, we are going to address negative cash flow. However, don’t celebrate if you have positive cash flow; there’s a strong chance that there are still some wasteful areas in your finances that could be improved.
If you have negative cash flow, there’s a great chance that you have poor credit.
Poor credit is often the result of not being able to pay all your bills on time. Poor credit is a symptom of not having a budget. I teach credit restoration but that’s another subject for another day.
How much is your negative cash flow? Once you know your negative number, you can come up with creative ways to close the negative gap.
Maybe you can find expenses you can cut back on. (cell phone, insurance, etc.)
Maybe there are expenses you can eliminate all together (cable, gym membership, etc.)
How about looking into adjust your tax withholding and bringing some extra cash into your household
Downsizing the car you are driving. Trade it in for a lesser expensive car.
Downsizing your house or apartment.
Maybe it’s a great time to consider a side hustle (Uber, Lyft,)
A part-time job
Start a business.
Now take the numbers you wrote down and compare your living expenses to the percentage chart. This chart will give you a ballpark figure of where you might be overspending.
If we take a household that has $5000 a month in net income; that means they are averaging $6563.13 in gross income. This is a $78k - 80k a year household income.
Roughly $1563 is going to taxes. If you want to become wealthy, you must pay attention to taxes. Imagine if you could pay a third less in taxes each month. You would bring home an extra $500 a month. That’s 10% of your net income and as you will see, it is very significant to your budget.
Let’s take the $5000 in net income and break down what each category should cost. We will start with the largest expense and circle around to the least.
Housing: 25% - 35% = $1250 - $1750
This number for housing may be reasonable or unreasonable depending on what part of the country you live in.
Insurance: 10% - 20% = $500 - $1000
This includes home or renters and automobile
Food: 10% - 15% = $500 - $750
This number includes eating out, so be careful.
Savings: 10% - 15% = $500 - $750
I recommend building a $3000 emergency fund, then moving this money to your 401k, 403b, or IRA account
Transportation: 10% - 15% = $500 - $750
This amount includes car payment plus gas and maintenance. The average monthly car payment was $554 for a new vehicle and $391 for used vehicles in the U.S. during the first quarter of 2019.
Giving: 10% - 15% = $500 - $750
As a Believer, I believe in tithing off the gross which would be $656
Personal: 5% - 10% = $250 - $500
Grooming falls under personal. For men, it’s a haircut, maybe a gym membership. If you are a woman, you are probably going to spend the full 10%. Women have more personal expenses than men.
June Collier
Corporate Network Marketer
678-837-JUNE (5863)
Call me... I answer!
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