It distresses me when I hear a friend talk about living pay-check to pay-check. I know that massive joy and stress reduction await them if they could just get to the point where they are one pay-check ahead. It makes getting to two, three or four pay-checks ahead so much easier. Budgeting, or lack of, seems to be the most common culprit. Many of the people I know have the money they need to make ends meet, but because they lack a spending plan, they don't plan where their money goes and it just "goes"! So, today I wanted to look at the question: where does it all go?
Below is our first sample budget. I chose a median income of $24,000 a year. For an individual starting out of college in that first "real" job, this is a pretty average take-home. It also provides a bench mark for you to consider. If your take home is half that or twice that, you can afford half or twice the amounts I list below. Let's call this first budget "Bob". Note that periodic expenses are averaged to the month.
Let's look at budget "Tom". Tom is like Bob in most respects but he's been willing to do with a bit less today so that he might have a bit more in the future. Let's see what his budget looks like.
Bob will save $1800 this year which he'll be able to use to wipe out his credit card if he's smart, adding $20 to his play budget next year.
Tom Trending will save $4800 this year. He can keep adding on to that for a few years and have a decent down payment on a house or he can buy a nicer car or move to a nice place or spend it on a nice trip... it's amazing how many neat things you can do when you are disciplined with your cash flow. A waiter once said something to that effect to me, "Life can be a lot of fun if you're careful with your money." He was like Tom and was telling me how he was preparing to take 4 months off to travel Europe using his savings. When he came back, he planned to go back to being a waiter and living his minimalistic life style again.
So, key points: having a budget is useful. Sticking to it is more useful. Using it to tune your cash flow really makes it worthwhile. It all takes discipline, to which end I hope you find the above encouraging.