Budget Plan Basics: Creating A Budget to Maximize Your Income

 

In one of my first posts, 11 Steps to Achieving Financial Freedom, I mentioned how tracking my expenses was a key component in creating my budget. I knew a budget would be necessary to meet my financial goals; but I made some mistakes along the way. My first month, I only factored in my fixed expenses. As you can imagine, I was completely off on my budget and it didn’t accomplish what I had hoped.  I did some research and was able to correct the mistakes I made in my original budget. The following month was much more detailed and had me factor in items I really didn’t think about, like medical expenses. I’ve provided a basic example below so you can see how I plan my budget every month.

This Budget Plan does not factor in legal fees such as child support, alimony, etc. If you are self-employed and have to take out taxes and insurance expenses, I would suggest adding these categories to your budget. You’ll also notice I have a line item for “Entertainment” which I use for concert tickets, movies and media purchases. While I may not have a specific section for vacations, I tend to put my travel expenses into “Entertainment” as well. If you travel regularly, it may be beneficial to create a section just for your travel expenses too!  The bottom table with all the totals was created to compare my expenses to my income. If there is money left over in a month, I make an additional payment toward my “focus” debt.

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A few tips: Be sure to include expenses that may come up annually or quarterly. Last month, I completely left out my License Plate Renewal and my Quarterly Parking Permit expenses. This left me with a deficit of $231 in anticipated costs. I also didn’t include the gift I planned to give for a wedding. Boom! Now I was off on my budget by $331! I don’t care what anyone says, $331 is a large amount and can have devastating effects on your monthly payment schedule. For example, if I estimate that I have extra money, I may make a larger monthly payment than normal. If I do this while my budget is off, I run the risk of paying a bill late or not being able to pay cash for expenses I had budgeted. It is for these reasons that I am continuously adjusting my Budget Plan and make a new one monthly.  That’s also why I only make the minimum payment at the time a bill is due and make additional payments at the end of the month. This helps me to avoid budgeting issues even if I miscalculate expenses. Next week I will be posting about debt repayment methods. This will help to explain why I make payments the way that I do and elaborate on “focus” debt.

I’d love to hear if this Budget Plan works for you! Please feel free to send comments and feedback!

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Inspire Me, Gluten Free

My name is Lauren and I'm the creator of Inspire Me, Gluten Free! I'm here to help YOU get more comfortable in the kitchen! How? Great question; with the art of meal prepping! I'm not talking the boring prep that leaves you wanting more halfway into the week. I plan delicious versions of classic and unique gluten-free meals. Originally, I started meal prepping as a means to manage my budget and my waist line. What I didn't realize was just how much money I was saving monthly, because I was buying less and wasn't wasting money on unused or spoiled food. Choosing fresh ingredients helped me consistently lose 1-2 pounds a week. I had more time in the mornings/evenings, because I wasn't having to cook during the work week. All of these benefits made a world of difference in my life and they can do the same for YOU! Disclaimer: I am not a nutritionist or financial advisor. All statements are my own and are not affiliated with any groups or organizations. These are personal experiences being shared in the hopes that they can make a difference in other people's lives.

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