A challenge most people face is trying to decide which bills to pay If you earn less than you spend in a month. This in itself can create lots of stress. Creating a budget or spending plan is fun and it creates Freedom. Use a budget to help control spending.
Most people view a budget as the enemy that ends ALL fun. You may have to give up spending in certain areas to allow spending in another areas. Why, unless you make enough money to do everything you want to do or have, you will run out of money. The budget helps you to see how you spend your money.
I found freedom in knowing what I could pay and it gave me a clear path on what I needed to do to earn extra money. By using a budget, I could determine how many additional hours I needed to work. I wanted to determine additional hours because it cost me time away from my family and my 1st money making gig.
There will be adjustments when your income is less than $3000 or $2000 or even $1000.00. Determining which bills to pay will be a major challenge.
Here are a list of the top five expenses that I put first and it has given me peace of mind. I can focus on earning more income for all other expenses.
Tithing (optional and depends on the person)
I begin with tithing. This is my personnel decision and is not forced. Tithes are a portion of the money that we earn and give to our church or your home of worship. The church uses the funds to pay for programs to help the community, the sick and less fortunate. This is up to you and is usually 10% of net increase. Don’t give if you do not feel it’s from your heart. Example: if I earn $800 for the month than I give $80 to the church. Yes this means I cut $80.00 out of something else but I think it's worth the sacrifice.
Put back 5% of your earnings for savings. Put back more if you expect a large repair, renovation, move or other large purchase or invest. Savings is used cover: Home Repair, Car Repair, Medical Bills, Vacation, Investments, Special Occasions, like parties etc. What if you have to use the saving later in the month for expenses? That's why the savings is there...the money will be there for you to pay a bill that comes in before the next pay date. It's also a little cushion in case car maintenance come before expected.
Pay living expenses after savings. You need money to live and this includes shelter and utilities, personal items, and household items. You will may need to adjust the primary expenses to fit your current income. If you bring in $800 a month and your rent/mortgage is $940.00 you will need to seek help to reduce your mortgage, bring in a room mate, earn additional income or move to more affordable housing.
If you do not cook you will want to budget your dinning and seek sales to keep your spending down.
You have to have a means of travel. We need a way to earn money, travel, or visit. This would include fuel and/or car payment. However, avoid car payments whenever you can purchase a car outright.
You need clothes to live. Clothing does not have to be expensive. I love the thrift shop and a great sale to keep my clothing expenses down.
Put back money for any upcoming Co-Pays to the doctor.
Practice paying your top necessities and use any additional money left to pay for other expenses such as debt, investments, gifts, offerings, special vacations and fun.
Leave a comment below with tips on how you choose expenses. If you have questions join me on Ask The Accountant session to brain storm to save you money! B&P Personal Cash Management