Knowing where your money goes on a daily and monthly basis is one of the primary keys to survival, financial security, prosperity and most importantly your sanity. The best way to know where your money is going is to develop a budget. A budget is simply a list of all your planned expenses for the month listed against your actual expenses. Developing a budget is the single most important thing you can do to insure that you keep your finances in order.
Developing a budget can be as simple or elaborate as you want it to be. Here at AfroDaddy.com we like to keep things simple so we will start with a basic budget that will work just fine for most people. You can start on a piece of paper or you can start on a computer. If you have Excel you can download the attached spreadsheet with the sample budget that we have created for this article.
- Organize your budget by the major categories of expenditure. Think of the major categories of spending you have each month and write them down. We will use the Survival Guide categories for our sample budget: Food, Shelter, Clothing, Health, Relax and Relate, and Money. List these on your paper or spreadsheet with some space in between. Across the top of the sheet make the following columns: "Monthly Amount", "Annual Amount", "Due This Month", "Paid This Month", "Total Balance", "Amount I Owe". Your sheet should look something like this.
- List each item of spending under the appropriate category, starting with the biggest items first and then working your way down to the smallest. For example, under “Food” you might have “Groceries” and “Eating Out”.
- Put in the amounts you spend on a monthly basis next to each item. The “Annual Amount” is calculated by multiplying the “Monthly Amount” by 12. If you are using a spreadsheet you can enter a formula and have this calculate for you but since this is not the Excel article I will not explain that here.
- At the bottom of the sheet add up the totals for each column to see what your monthly and annual spending looks like. You may be surprised at some of the large numbers you see there. Don’t worry, this is your opportunity to make some adjustments to the line items in your budget.
Once you have completed the process, you will have a clear picture of how much money you need to bring home each month to live the life you have created. If you find that your monthly bills exceed the amount of income you have there are 2 obvious choices: a) make more money or b) cut down your expenses. The choice is yours but just remember it is much easier to adjust your expenses than it is to find a new job or squeeze a raise out of your boss. We will strive to create as many articles in the Survival Guide that offer tips to reduce expenses but remember this is a community effort. If you have ideas, leave them in the comments of this article.
Helpful Tip: Develop a “cash carry limit”, or the amount of cash you feel comfortable carrying with you at any time. This may be $100 or it may be $10 but if you always stay within that limit you will tend not to overspend. Leave the ATM card at home as this is temptation to get more cash than you may need.
Helpful Tip: You should create at least 1 budget line item for entertainment (and stick to this monthly limit). If you don’t budget for any fun you will either a) never have any fun or b) overspend your budget every time you do have fun.
Helpful Tip: Do NOT leave any monthly expense out of your budget, no matter how small. The little expenses add up and can be major budget breakers. Also don’t forget about expenses that occur quarterly or annually (like dues and subscriptions). These can also sneak up on you and impact your budget.
The minimum wage in California is $8/hr, which translates into $1,280/month (before taxes). Based on our conservative sample budget, the average black man cannot survive on minimum wage.
The minimum wage is different in each state and ranges from $5.15 in Wyoming up to $8.55 in Washington. Some cities however have a higher minimum wage than the federal minimum.
Credit Cards are the enemy to your budget. Spending on your credit cards can often lead to overspending your monthly budget and leading you down the path to debt. If possible, leave the credit cards at home and only carry them when you know you are going out specifically to make a credit card purchase on a large item (over your cash carry limit).
Your budget should have a line item for savings/investments. If you enter this as a bill then you will always remember to pay yourself!
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