Preparing for Bills: Income and One Time Purchases
Money management lies in understanding the different types of payments you’ll make: fixed and variable expenses. There’s the misconception that if you spend less on your variable expenses, you’ll have more money to afford higher fixed expenses. This isn’t always the case.
A fixed expense is going to entail things like your rent or mortgage payments, car and health insurance premiums, etc. These are more often than not non-negotiable – with few and infrequent caveats to the types of fixed payments, like refinancing your mortgage or making a deal with your landlord.
The opposite of a consistent and stable expense is the one that fluctuates, though more specifically that it fluctuates based on spending habits. These expenses encompass groceries, entertainment, and gas for your car. They change based on need or necessity. These are the items that most backseat budgeters will tell you to cut back on, but not everyone has fat to trim from these items. If so, it will only range a couple dollars each paycheck.
Income and Budget
When it comes to managing your own budget, the fixed expenses come first, then general estimates for your variable expenses. The remaining excess of your paycheck goes into savings or your variable expenses. Depending on your expenses and income, you’ll vary in the amount you’ll be able to save from every paycheck. For those unable to make significant deposits to their savings because of this trouble, it’s unlikely that saving an extra three dollars will actually benefit you that drastically in the long-run. As such, enjoy that coffee or pastry you got when you ran late to work.
Fat You Leave On
Not everyone has fat to
trim. In trying to cut off those delicate slices of fat, you may risk hurting yourself in the process. Either by downsizing your groceries or trying to ration your gas, you can end up doing some damage that will require a bigger fix later on. For example, if you’re not getting enough food on a daily basis because you cut back to only eating rice and beans, you may not have the energy to work or put in the time after work to job hunt. Taking care of yourself is more efficient in the long-run.
Trim the Fat
For everyone else that can trim a few things from their budget, you likely should. For the mysterious millennial that is buying a six-dollar coffee every day, try cutting it in half by making your own coffee at home every other day. Other areas you can excess is in entertainment expenses, like going to the movies or buying video games.
But Don’t Over Promise Fixed Expenses
All of that being said, finding and excising the excess from your variable expenses doesn’t fix your budget if it’s an issue of fixed expenses. This is why abstaining from buying fancy coffee isn’t a fix for people that can’t find the last $100 in their budget to pay their rent.