Budgeting: Managing Money

Austin Venturini

January 31, 2017

Mrs. Oliveira, Block 5
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Budgeting: Managing Money

Spending money is tempting. The temptation occurs even if a person does not have the

money to spend. Most people cannot buy everything they want without worrying about if they

can afford it. Because the typical American household members make just above $48,000.00,

according to the 2015 Social Security National Average Wage Index, their salary is not likely

enough to fulfill all of the typical Americans wants and desires. In many cases, the salaries of

Americans are not enough to compensate for their essentials never mind their desires (Social

Security Administration). Situations where expenses are greater than income, is where

budgeting is most needed. While there is no specific monetary number to be considered rich in

the United States, in the eyes of President Obama, individuals who make more than $200,000 a

year are rich. While an income of less than a $11,880 for an individual is considered poverty

(What Income Level is Considered Rich). Whether impoverished or wealthy, budgeting is a

necessity individuals need to use to manage money efficiently and to help identify spending

habits that could potentially have an adverse impact on their financial situation.

For a budget to be effective, it needs to be planned and recorded. To gather income,

people must look at their steady pay, as When projecting the amount of money you can live on,

don't include dollars that you can't be sure you'll receive (Making a Budget, Making).

Non-steady income is any money that comes in, that is not from a persons usual weekly/

monthly pay, such as income tax, gifts, and bonuses. Weekly, monthly, and annual earnings

should be noted by the individual. After all income is compiled and recorded, expenses should be

also collected the same way. In order to obtain the value of all expenses, all bills, spending, and

savings money should be included in the review of finances. Gathering this data is just the first
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step in creating a budget. Keeping records is very important. It is also crucial to account for all

expenses. Once information is compiled and recorded, unnecessary purchases should be

identified and noted, to assure similar purchases will not happen again throughout the budgeting

process. For people looking to reorganize their budgets, the resistance of simple activities such as

dining out, can be remarkably beneficial. While gathering this information, people must watch

for cash leakage that would cause superfluous spending to be pinpointed.

Once all income information is accounted for and recorded, the outset of creating and

abiding to a budget can occur. The sum of all expenses should be subtracted from the sum of all

of the earnings. After subtracting these values, the difference between the two numbers that were

inputted is the amount remaining, which is where individuals should allocate to save for the

future and/or unexpected life changes such as loss of job, car problems, house problems, and/or

illness (Personal Finance). If the difference is negative, then there is more money being spent

then made. In this case:

Spending beyond your limits is dangerous. But if you do, you've got plenty of company.

Government figures show that many households with total income of $50,000 or less are

spending more than they bring in. This doesnt make you an automatic candidate for

bankruptcy -- but it is definitely a sign you need to make some serious cuts. (Making a

Budget, CNN)

Assuming the difference between the two values is not as high as desired, spending cuts will

need to be made. For example, whether the spending cuts that are made derive from money spent

shopping for personal items, or switching phone and internet providers to a service plan of lesser

expense. Removing luxuries from expenses is one of the most effective ways to begin a budget.
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Being aware of luxuries disguised as necessities is beneficial to the budget, as long as after the

disguised luxury is eliminated from expenses once identified (Making a Budget, CNN) .

If eliminating luxuries is ineffective to live comfortably, there are other ways to increase

available income. The most efficient way to increase available income is to increase total income

itself. There are various ways to achieve this increase. Once such way would be to seek a second

job to begin to bolster ones savings. Even a few hours a week could be remarkably helpful in

increasing available income. If this strategy is undesirable or not an option, there are many other

ways. Recycling returnable cans or bottles is an easy way to add a few dollars a week to provide

additional income per week or month. Online surveys will pay to have people participate. Doing

a few of these in free time could also be an easy way to help save money. Along with surveys,

testing products for companies could be an alternative way to make money (Shin). By

increasing income in these aforementioned ways, will allow the individuals to have more

disposable income. If extra spending is unnecessary, then all income that derives from these

methods is purely extra income available to be saved for the future.

The reason that increasing income is highly beneficial to an individual or family is

because while budgeting, every dollar counts. Adding the amount of cash flow throughout the

budget increases the effectiveness. For example, if a person has an income of $3,500 a month

and $3,000 of that income is being spent on bills, groceries, and mortgage, then $500 is their

monthly available income which is saved for the future (Refer to Fig I). By increasing their

income to $4,000 a month, using the above mentioned strategies all of the extra $500 made is

also available income. Therefore, by adding the extra income, they went from spending 86
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percent of their income to just 75 percent. A visual representation is provided for better

understanding (Refer to Fig II).

Fig I Fig II

Creating a budget can be difficult and confusing to many people. Fortunately, there are

many apps available to download that help people to both create and track budgets. One of the

best rated apps is Mint Budgeting app. This app is rated so highly because it is user friendly. The

app creates a budget plan by using given bank account information. To access these features

You connect the Mint app to your bank and the app can use your details to help create a

personalized budget (Smith). Once the app creates a budget, there are additional features,

such as notifications when a credit card makes an unusual purchase (Smith). Some people are

opposed to allowing apps to access their personal finances, but there are alternative apps that

allow the same effectiveness, but also refrain from needing access to personal information.

Spendee is an app that does not connect to any accounts. This app allows the user to manually

input all expenses and creates charts using the given information (Best Personal Finance

Apps). The drawback of this app is that the app only tracks expenses. With only expenses being
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tracked, the site can only be effective if the income of the user is known and noted allowing the

difference to be determined. Whether the users have a personal opinion to allow an app access to

their bank account or not, apps are an easy alternative to personally creating a budget. Although

personally creating a budget will likely best fit wants and needs.

Another consideration as an alternative for using an app is to seek professional help.

Meeting with a financial advisor is helpful because this opportunity allows professional opinions

and tips that will best fit the needs of the clients personal budget. Companies like First Financial

Advisory Services.inc offer suggestions Whether you are just starting to save for your future,

or are a seasoned investor, First Financial Advisory Services, Inc. has the financial management

and planning experience to direct you towards reaching your objectives (Gain From a Truly

Independent Perspective). Seeking professional assistance can be rewarding for the person

looking to improve his/her financial situation.

Some people may believe that the very rich do not budget. This perception derives from

seeing fancy cars and lavish trips that wealthy people take. These trips very well may be afforded

because of effective budgeting. The rich are often rich because of excellent money management.

This status is mainly because they were disciplined and determined enough to do all the right

things that enabled them to accumulate their wealth and, in many cases, retire early (Hodes).

Along with managing money with discipline, temptation also plays a role in the process in

becoming wealthy. For most people, The temptation to live large and beyond our means is all

around us: TV, magazines, friends, family, colleagues, the Joneses. It is nearly impossible to

escape the pressure to spend, spend and then spend some more. The problem is that

overspending often leads to debt accumulation, undersaving, and long-term financial insecurity
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(Hodes). The benefits of eliminating all wants from the immediate future allows for the

financial freedom in the distant future.

The difference between wants and needs may be hard to determine in some cases, but

with the ability to suppress the temptation to spend money, financial freedom could be possible.

Gathering information is just the first step in creating an effective budget. The gathered

information is meaningless unless it is used to create a budget. When a budget is made, in order

to allow it to have the greatest impact as possible, the budget must be reviewed and amended to

better fit the means of the person who is budgeting. In order to maximize the available income,

increasing income will immensely benefit the budget. If the poorer population was to use this

information to better their understanding of creating a budget, and then use these methods in

their own finances. They may rise out of poverty. Proper use of these techniques could allow

financially burdened people to potentially become financially free.

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Works Cited

8 Simple Steps to Help You Stick to Your Budget. EveryDollar,2017,

www.everydollar.com/blog/8-steps-to-help-you-stick-to-your-budget.

Creating a Budget. Better Money Habits, Bank of America, 2016,

www.bettermoneyhabits.bankofamerica.com/en/saving-budgeting/creating-a-budget.

Gain From a Truly Independent Perspective. First Financial Advisory.com.,

www.firstfinancialadvisory.com.

Hodes, Jocelyn. 10 Things Rich People Know That You Dont. MarketWatch.com.,2017,

www.marketwatch.com/story/10-habits-of-high-net-worth-women-2014-07-02.

How to Make a Budget. Goodbudget, 23 Apr. 2015,

www.help.goodbudget.com/customer/portal/articles/1114483-how-to-make-a-budget.

Making a Budget. CNN, CNN, 25 May 2015,

www. /pf/mo.money.cney-essentials-budget/nn.com.

Making a Budget. Making a Budget | Consumer.gov, 2010,

www.consumer.gov/articles/1002-making-budget.

Personal Finance Personalfinance.duke.edu, 2011,

http://personalfinance.duke.edu/manage-your-finances/budget/overview

Shin, Laura 44 Ways To Make More Money forbes.com, 2015

http://www.forbes.com/sites/laurashin/2015/02/26/44-ways-to-make-more-money/#2085

a4866e17.

Smith, John. 12 Best Budgeting Apps for 2017. gottabemobile.com., 2016,

www.gottabemobile.com/best-budget-apps/.
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Social Security Administration The United States Social Security Administration,2017,

www.ssa.gov.

(What Income Level is Considered Rich) Financialsamuri.com,2013,

http://www.financialsamurai.com/how-much-income-do-you-consider-to-be-rich/.