Creating a Sustainable budget is defined as a budget that works to meet all of your short-term and long-term needs. It keeps you feed, clothed, gas in your car, your mortgage or rent current, whether you have a lot of money or times become lean.
To create the lasting sustainable budget you must plan, and do it early. You don’t start when you lose your job, get into a car accident or have any other time of financial crises. Creating a sustainable budget will take care of those issues.
The money you have in good times is budgeted heavily so it will last during bad times. I see too many people who though “caution to the wind”, when it comes to spending. They think they are so special that they will never hit hard times with a job loss, contract loss, or medical emergency.
Don’t be fooled, it happens to folks of all income levels. So, it does not matter if you are low income or uber high income you have budget your money. You never know when the, “well will run dry” or the money will seem to evaporate due to lose of income.
So, let’s get started and create a sustainable budget now. You will create the short-term, the long-term and the budgets for the specific things you need.
The common sense approach to avoiding a time of financial crises during an economic downturn is to guerrilla budget when times are good as well as when times are bad.
Unfortunately, many people don’t think about budgets until finances are in trouble. Start to create your sustainable budget and continue improving it as time goes on.
I saw a new story about a young girl, who became a high-income singer, with a contract from a major media company, then came a terrible time of financial crises with an illness. Now her 1.2 million dollar home is being auctioned off. Where did she go wrong? Is she any different than most Americans in her position?
The answer is 1. Apparently she did not understand how to budget the money she earned, 2. She didn’t understand the limits of the money she earned. 3. She didn’t understand that, no matter what your income emergencies happen. 4. She did not create a sustainable home buying budget based on worse case scenarios.
The answer to the second question above is, NO, she is not any different than most Americans, and did not anticipate a financial crises.
Budgeting is not taught in most high schools and colleges or graduate school. Because of that we even have PHD’s and MD’s (doctor of philosophy and medical doctors), going broke due of mismanagement of money or the lack of budgeting skills.
They don’t understand that a financial crises can happen to anyone, so creating a sustainable budget early will prevent problems.
In this article I will give you a few quick tips to creating a sustainable budget using my guerrilla budget method:
1. Live below your means no matter what your financial status to create a sustainable budget.
This sounds like common sense, but many who have common sense and a good income don’t, because you feel money will make up for it.
It does not. Ask all of the broke entertainers who once made millions. The 8 cars, and the 8000 square foot house is only a distant dream.
They think about how they could have purchased 3 nice cars, and a 3000 square foot house, put money in savings, invested aggressively, and they would have been set when the entertainment contracts dried up.
Many get caught in something as simple as not paying required yearly taxes. Pay your taxes first, then pay yourself in savings and investing, then pay your other affordable bills.
2. When you make a lot or are awarded a lot of money
When you enter into a high income or windfall pretend like it has to last you 100 years.
The is a good trick for those who don’t have a lot of self-discipline, it works because you trick your mind into believing the money does not exist, so you are forced to guerrilla budget it.
When you are distracted one day you open your savings and investment account and you realize you did something really smart. You created a sum of money you can actually live off as your business or income falls on hard times.
3. Be conservative with your purchases
There is no law that says when times are good you should waste money. The problems come when you have not grown up with financial discipline; too many income earners do.
Don’t fall in the trap of, “I have to spend big to have quality products”. You don’t. You can get nice clothes, shoes, cars, homes, and education at a very affordable cost and high quality.
Some things that are very expensive, you will later find that you simply spent too much money and could have gotten the item for a fraction of the cost.
Do your homework, do lots of research and get the best item for the best price. This is a major step to creating a sustainable budget.
4. Buy a home and car with a monthly note you can afford
You do not have to max out your monthly income in “monthly bill payments”. That is that your entire paycheck goes to “monthly bill payments”.
Here are examples; Why not buy the certified pre-owned car with a monthly note of one-third of the new car? Put the remaining two-thirds in a couple of different savings and/or investment accounts.
If you lose your job, you can pull from one of those accounts to continue your payments until you get another job.
5. Decide what you can afford based on your income and future
Start with a written budget. Your budget should include cost to run your home (maintenance-rent or mortgage), food – clothes – medicine. Also include things such as getting to work and maintaining a car, going on vacation, and to save, save, save for now and the future.
Everyone has different needs. It is imperative to identify all of your needs you have now or may have in the future. This is an analysis that will take time to figure out.
6. If you have an addiction to expensive “things” work on that problem
That is the number two problem that causes poverty with people who make a lot of money. The number one problem, is “budgeting ignorance”.
If you have an entertainment contract that last three years, spend like it will last three years.When you are an independent contractor on a job that will last two years, live like it is only two years.
When you are self-employed don’t fail to get proper liability insurance, health insurance and all insurance that is required by your industry. For those who are self-employed with an office space lease make sure you understand your lease by talking to a business attorney, before you sign.
The general idea here is to get cosst under control, understand that you don’t need expensive things.
7. If you work on a contract like the singer above probably did
You have to be especially careful with spending because you will have a big tax bill at the end of every year based on your big income (quarterly after the first year).
When you are an independent contractor of any type – self-employed, contracted worker or any other; you will need to pay taxes by quarter and then year-end.
The worse thing to do is to file too many exemptions so you can have extra money in your paycheck. You promise yourself that you will pay it back, and of course that doesn’t happen. Eventually, you get into a nightmare loop of owing taxes, making payments and getting future behind.
8. Remember that it takes a long time to create a sustainable budget
-Because you have to consider cost that you normally don’t think about.
-You have to consider all timelines for payments.
-Then don’t forget things you may need in the future.
-You can get a simple short-term budget, but a long term budget is ultimately the most important.
-When you do all of the above you creat a guerrilla budget
Lois Center-Shabazz | Course Delta Agency
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