Becoming Financially Independent – Step Two
Cutting the budget. Yep, that’s right. Cutting the budget is all thats needed to generate extra money at the end of every month. Money that you can use to pay down debt, build an emergency fund, ear mark for large purchase, or invest. Eventually, the last two will be your monthly goal. But how?
Now that you have a spreadsheet set up with at least two months expenses detailed, now we need to look at where we can cut out some expenses. Let’s look at an example spreadsheet might look like:
|December 2018||January 2019|
|Working Salary (Fixed)||$5,618.09||$5,618.09|
|Rentals Income (Duplex)||$1,300.00||$1,300.00|
|EXPENSES (Fixed Monthly)|
|Rent / Insurance||$1,750.00||$1,750.00|
|Mortgage for Duplex, Taxes||$604.82||$604.82|
|Electricity – Primary Residence||$104.51||$104.51|
|Cable TV & Internet||$144.39||$144.39|
|Credit Card A+B+C||$180.00||$220.00|
|Surplus (Deficit)||$ (886.84)||$ (84.32)|
In this budget example, we see that at the end of both months, there is a deficit (in other words, the person spent more than they earned). If you look carefully though, the lions share of the expenses is “shopping”. This alone is killing any possibility of having money left over at the end of the month. Without knowing the whole story, the first thing I’d suggest to someone in this situation might be to start by cutting down on shopping, and use the surplus to pay off the credit card debt.