Saturday, March 12, 2011

Creating a Budget {Part 2}

Show Me the Money

Each family will have different things to consider when creating a budget, but one thing we all have to know before establishing any kind of budget is what our Net Spendable Income (NSI) is going to be each month.  Because of the variety of jobs that exist, there is no simple formula for figuring this out.  Some of families, like my own, earn an annual salary making each and every paycheck we receive the exact same.

It's easy for us to know our NSI because it never changes.  Others, however, work hourly, on commission or depend on tips, so it's not so easy to just slap a number into the spreadsheet.  You've got some numbers to crunch first.  You can achieve your NSI in one of two ways: {1} Use last year's total income and divide it by 12 for this year's anticipated average or {2} Decide what the absolute minimum is that you'll make any given month and use that as your NSI, throwing overtime or bonuses into the Surplus column.

In our household, I use the Surplus column for unexpected income like ...
  • Reward check from our credit card
  • eBay sales
  • Annual bonus
  • Tax returns
  • Cash gifts for birthdays and Christmas
So, in my opinion, that is step one in creating your budget because you can't budget money you don't have!

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