The word "budget" intimidates many people, however it should not. YOU are in control of your budget, YOU set it up each month. Once the budget has been set up, then it is important that you stick to it.
Let's take a look at an example. Since I live in Indiana, I will use Indiana's tax rate. I will use a family of 4 that has a GROSS income of $1,000 per week. The first thing I need to do is to find out the NET pay. There is a Social Security Tax of 6.2%, Medicare Tax is 1.45% and State Income Tax is 3.4%. I will also say that their employer has a 401k plan that matches 50% up to 6%. In other words if I contribute 6% to my 401k, the employer will throw in 3%. Let's say there is also a health insurance plan that they are in which the employer deducts $70 per week from the check. Let's also not forget about the Federal Income Tax. I'll just use $100 per week for that.
Here is how the net pay would look:
· Gross $1,000.00
· Social Security Tax -62.00
· Medicare Tax -14.50
· State Income Tax -34.00
· 401k contribution -60.00
· Health Insurance -70.00
· Federal Income Tax -100.00
· NET PAY $ 659.50
Now let’s begin our budget. If the net pay is $659.50 per week and there is 4 weeks in a month, the net monthly pay is $2,638.00.
Then get out all of your bills and make a list. You are doing this so you know what you are going to have to pay. I am talking about ALL of your bills. Your utility bills, credit cards bills, mortgage and even the bills that you do not pay every month like car insurance or life insurance.
One you have a list of your bills, get a piece of paper and write at the top $2,638.00. This is how much you have to work with. Unlike the government, you can not print money when you run out nor can you keep having deficit spending. You must stay within our budget.
Here is an example of how the budget would look:
· GROSS INCOME $2,638.00
· Food -480.00
· Mortgage -650.00
· Gas -90.00
· Electric -80.00
· Water & Sewage -40.00
· Telephone, Cable, Internet -130.00
· Clothing -100.00
· Health ins. deductible -100.00
· School Supplies -100.00
· Home Insurance -30.00
· Property Taxes -75.00
· Life Insurance -30.00
· Car Insurance -30.00
· Car Gas -200.00
· Car Repairs -70.00
· Kids Allowance -80.00
· Parents Allowance -160.00
· Other Debt -125.00
· Charity -68.00
· NET INCOME 0.00
As you can see, the top priority is to be sure to have food. This does not mean that you can have steak. You have to go with what you can afford. It may be Banquet TV dinners or soup. You see the next thing is to be sure you have shelter so you should pay your mortgage and utilities.
You are also setting aside money to prepare for the future. When you car insurance comes due, you won’t have to scramble to find $900.00, you’ll all ready have it. The same is true with your other non monthly bills.
It is important as you do your budget to stay within your budget. That may mean that you get your clothes at a rummage sale or Good Will. One thing to remember is that 4 times a year, you will get an extra week in the month. What that will mean in this case is about an extra $429 after you subtract for groceries, gas and allowances. Multiply that time 4 and you are getting an extra $1,700 to apply to your debt, save for a car, vacation or something.
Also, if you need or want more money, you can always pick up some kind of part-time job. Another thing I want to point out in this example is the other debt. If you are debt free, that would free up $1125.00 per month.
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