Jack
Income: $6,181 per month after taxes (which is a gross annual salary of about $100,000 see salary calculator)
Tithing: $600.00
Saving: $0.00
Home Mortgage: $2,300 per month (is about 28% of gross salary)
Utilities (water, trash, electricity etc.): $300.00
Car payment: $515 (approximate average new car payment in 2018 according to Experian)
Boat Payment: $500
Groceries: $720 (higher income earns spend about $180.00 per week on food according to Gallup in 2012)
Clothes: $400.00
Entertainment: $900
Total Expenses: $6,235
Jack's monthly cash flow (Income - Expense) = -$54.00 per month
Jill
Income: $2,746 per month after taxes (which is a gross annual salary of about $40,000 see salary calculator)
Tithing: $275.00
Saving: $411.90
Home Mortgage: $933.00 per month (is about 28% of gross salary)
Utilities (water, trash, electricity etc.): $300.00
Car payment: $0.00 (bought used car for cash)
Boat Payment: $0.00
Groceries: $300
Clothes: $50.00
Entertainment: $400
Total Expenses: $2,669.90
Jill's monthly cash flow (Income - Expense) = $76.10 per month
In no way, shape, form, or fashion is this an ideal budget or the correct way to create a budget (maybe we'll save that for another blog post) but I hope it makes the point that the amount of income doesn't necessarily gauge "broke-ness". Rather you realize it or not in this example Jack is broke!!! Not because of the amount of money he makes but because of his decision making with the money he has. Let's say in a year his budget stayed like this each month, he'd end up in the hole $648.00 ($54 times 12 months). How would he pay for that? A credit card? A personal loan? Both with ridiculous interest rates! It would be harder and harder for him to become cash positive if he doesn't change his money habits; thus the cycle of "broke-ness" continues.
Although Jill makes $60K less than Jack, she is on a road leading to financial emancipation because she is saving and not consuming all of her money. In a year she would have $913.20 if her budget stayed the same. Now image if Jill made as much as Jack and kept her same money habits; she could start asking questions like what should I do with the extra money? If I save more can I retire early? How can these extra dollars help me with my goals? In reality, broke is broke no matter how much you make, so don't live your life broke! I know it's hard to pass up the newest "this" or the most expensive "that" at times but do these things make up who you are? That's my challenge to you... get the highest income you can while enjoying what you do (see Work!!!) but the key is to learn how to manage your income. Let us help if you need it. Be blessed this week!
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"Where you choose Faith over Fear for your Finances"
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