How to Create a Budget that Increases Your Income

Many people consider developing a budget to be a simple task. But there are a whole group of other people who just don’t like balancing checkbooks, working with spreadsheets, or crunching numbers of any kind. In an economy like the one we’re facing right now, creating a budget is in everyone’s best interest. You’ve got to outline your expenses and your income, even if it means you have someone else do it for you. Your budget should include the essentials - what your monthly income is, what bills and monthly expenses you have, projections of expected increases and decreases, and some buffer for the unexpected.

If you don’t have Microsoft Excel, don’t feel the need to buy it. Use any of these free resources:

• Open Office
• Google Docs
• Budget Calculator

If you’re using a spreadsheet (or a piece of paper)…

Make two columns - one for income and one for expenses.  In the income columns, write down all the sources of money that you receive - paychecks, child support, commissions, etc.  In the expenses columns, list of all your major regular bills (i.e. rent, gas, electric, groceries, etc.).  If your bills vary from month to month, put the average amount that you expect to pay. Then add at least 10% for those unexpected expenses, if you can.  Hopefully, you have more coming in than you have going out.  If you’ve got more going out than coming in - keep reading.

Now, do what few others do - project a different scenario.

Make another “imaginary” budget that shows monthly costs, income, and the difference between the two… except:

1. Exclude monthly credit card interest amounts.
2. Exclude auto loan interest.
3. Exclude 25% of any “impulse buy” amounts.
4. Then find the sum total of those three.

These three figures represent the amount you could conceivably avoid paying every month. If the total you come to is even just 10% of your monthly expenses (and for some it will be even more than that), you are paying a decent amount of your income to charges that could potentially be avoided.

Make the hard choices…

Only you can decide if paying 10% (or more) in overhead is worth it to you. Some people prefer to have their items earlier rather than saving for them. But if you are someone who has more going out than you have coming in, you will need to make some hard choices. Find places to cut back - save money on your grocery bill, cut back on some cable channels, or cancel your monthly DVD membership account. If these cut backs aren’t sufficient, you may need to consider getting a second job (if that’s possible). Making these decisions are tough, but at least you are taking charge of your situation.  Choices like these are best made with a clear and rational understanding of what your situation actually is, after you’ve created your budget.

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