Continuing on in our mini-series about budgeting, we have talked about fixed expenses and variable expenses. Now we add to our budget talk with fixed income.
Fixed income can consist of any of the following items:
Net income from salary – that is your income after all your deductions have been taken out for taxes, medical, social security, etc.
Dividends and interest – these are the proceeds paid as a repayment for an investment you have made in a savings account or other investment vehicle.
Bonuses that can be reasonably relied on. Most of the time these days bonuses are not reliable because of the economic times and we already talked about them in the previous entries that they are generally one shot sums of money.
Pensions – these are retirement plans that you may have by virtue of working for a long period of time with an employer.
Social Security – the payments that you receive after contributing the Federal program throughout your life. Social security kicks in when you hit retirement age and the amount that you receive varies based on your age and income. That is a separate book in itself and the tax implications have to be taken into account as well.
Alimony or child support received – these are the amounts court ordered that you receive for keeping the lifestyle that you had while married and/or to take care of your children.
Income from sources outside of your salary- these are income streams such as distributions from businesses, freelance work, royalties, and any self-employment income that you are receiving.
The way that the formula for budgeting works is that you take your fixed income that we have talked about, subtract out your fixed expenses. Anything left in fixed income can be used to pay for your variable expenses. Anything left in cash you save or apply for something else – like extra bill payments.
If there is no cash leftover or you are short, you need to make changes to your budget and make the income that you receive fit.
That means that you need to cut back on expenses and see where you can trim wherever you can. Remember that you are still living in a decent country where you are not in the streets (hopefully not yet) and that you should have some wiggle room in terms of adjusting what your outgoing costs are.
If things are in very dire straits, you are not alone and you need to talk to your creditors and set up some adjustments to your payment plans. You also may have to make more of a concerted effort to cutting out expenses and expenditures. That is very hard to do but all bad things don’t last forever just as all the good things didn’t last forever.
Everything in one way or another has a price in this world and if your budget is askew, you need to get things back in balance for your sake, your family sake and for your sanity. Once you are on a path to keeping and getting things squared away you should be feeling a little bit more in control of your life (as best as any of us can) as well.
Oct 08 2009
Kim Isaac Greenblatt
Fixed Income In Budgeting