Do You Live on a Budget?

3-Ways-to-Make-Living-On-a-Budget-EasierA recent article says that more and more people actually cannot afford to pay rent where they are currently living.. The reason is that rentals have skyrocketed since the 2008 financial crisis—caused by the housing crisis. The housing crisis caused many people to lose their homes, and the rental industry saw a way to “cash in” by increasing rent—hey, they gotta live somewhere. What the article said especially is that in some parts of the country monthly rents start at around $800 a month, and if you work at a $10 an hour job, your take home is $1000 a month—meaning you are paying more than the recommended 30 percent of income for housing.

An Amarillo banker made the statement recently that 200 million Americans do not have a budget. What he meant is that 200 million Americans do not write down their total monthly income, after taxes, their monthly savings, and their monthly expenses. This same banker said that many Amarillo households actually cannot afford their monthly payments for the cars they drive. What he meant is that too many Amarillo households are driving around in cars where the total monthly expense of car ownership exceeds 10 percent of their monthly income. And, when you add high monthly car payments to high rents or high mortgage payments, too many Amarillo households are flocking to payday loan companies just to stay afloat. Does this describe you?

So what is the purpose of a budget? A budget “toolkit” starts by asking several questions such as: “I plan to build an emergency fund by this date. The amount of money I will need is.” Next the toolkit asks, “I plan to increase my net worth by ($ amount) by (date). Here’s how I plan to do it.” Next the toolkit asks this: “Here are my other financial goals.” Then the “rubber meets the road” with the toolkit, with these questions: “Monthly income (after taxes): “Income/salary from all sources, investment income, other income, total monthly income.” Monthly savings: General (emergency fund), Education (child) Retirement, Other, total monthly savings.” Under monthly expenses, the toolkit asks for a detailed itemization of all expenses—mortgage, rent, homeowner association fees, cleaning help/landscaping, laundry, gas, electricity, water, home phone (including long distance), mobile phone, cable internet access, security.” Under personal expenses the toolkit asks for the amount spent on “new clothes, dry cleaning, barbershop/salon.” Under Food, “groceries, dining out.” Under Auto/transportation, “car loan/car lease, car insurance, maintenance, public transit, parking, gas. Under “Other, “child care, pets, credit cards, other loans.” Under Health, “toiletries, cosmetics, pharmacy, health club.” Under Entertainment, “movies, vacation, parties/gifts, subscriptions.” Under Education, tuition, books student loan.” Now add Donations to this list such as what you give to your church or charity. After you add up all the monthly expenses you subtract the amount from your monthly income and you get your “Net cash flow.” It is “net cash flow” that is lacking in too many households. It is “net cash flow” where the old saying, a lot of month left after my money (runs out) that has people borrowing from credit cards, running to pay day loan and auto title companies, or begging relatives to let you “hold” some money.

Do you have a budget or are you flying by the seat of your pants, spending foolishly on things you know you can’t afford? Are you spending hundreds of dollars renting movies when you have no food in the frig? Are you buying clothes, shoes and cosmetics every week at the mall when you know that if your car breaks down you have no money saved to get it fixed. Do you spend recklessly each week or each month, knowing that you are already so far in debt you can’t minimum payment your way out with pulling cash off one credit card to pay off another? Are you running scared from creditors calling you about overdue bills? Do you budget to pay your property taxes each year of just spend like a nut and end up paying penalties for late payments? Are you teaching your children about budgeting or allowing them to think that there is a money tree somewhere that you go and shake to give them everything they want? Are you headed for serious financial trouble with the way you handle money. The banker mentioned some people in Amarillo who are earning more than $100,000 a year and still can’t make ends meet. If you lose your job are you two paychecks away from being homeless? Can you do better with how you spend and save your money? Will you stop living beyond your means hoping to win the lottery?

Copyright 2015 – L. Arthalia Cravin. All rights Reserved. No part of this commentary may be reproduced, stored in a retrieval system, or transmitted by any means, electronic, mechanical, photocopying, recording, or otherwise, without written permission from the author.

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