When you compile your list of outgoing expenses, you may come up short. You aren’t alone. In fact, a recent survey of Americans showed that 53% of respondents live paycheck-to-paycheck, meaning they have no money left after all of their expenses are paid. On top of that, more than 1 in 10 can’t even go one week without being paid because they have zero savings and no safety net.
A budget deficit occurs when expenses outpace income. To resolve a deficit there are two options: earn more or spend less. Earning more can mean monetizing your hobbies, picking up a few shifts a week as a rideshare driver, walking dogs on the weekend or creating a passive income stream. It could mean asking your boss for a raise or having friends and family return the loans you’ve extended to them.
Cutting your expenses can look like skipping happy hour, packing a lunch, or dropping that gym membership you never use. It can also look like taking a short term loan to pay off high-interest debt or reducing your utility bills by changing your habits.
When you make these adjustments to your spending and earning, what you’re essentially doing is aligning your budget with your values. If travel is a goal and a priority for you, maybe highlighting that your take-out orders are eating up the funds you could be allocating for airfare will compel you to change your dinner habits.
A surplus occurs when your income outpaces spending. If you run the numbers and have a surplus, that’s great! What you do with it is up to you and your goals, but here are some ideas.
Outlining everything in a spreadsheet is great, but how do you
make it work? Those numbers mean very little unless you commit
to sticking to them in a meaningful way. Of course there will be
slip-ups, that’s to be expected, but all is not lost.
Your budget is a living document that will constantly evolve to
match your income, your expenses, and more importantly—your
priorities. Remain realistic, evaluate often, and don’t be
afraid to readjust. Budgeting isn’t just about balancing your
income, it’s about putting you on even footing for the future so
that you can create wealth for yourself and
for generations to come.
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