By overstating variable expenses and understating variable income, you can create a cushion in your budget.
As we all know, filling up your gas tank doesn’t cost the same amount every time. Sometimes it’s $30, sometimes it’s $40. Choosing to put $40 for gas in your budget ensures that you aren’t overspending. It also creates a little cushion each time you underspend. If you have any kind of variable income, like getting tips, you probably have a good understanding of how much you pull in on the good days vs the bad days. By inputting the lower earning days as your income on you budget, you ensure that you’re not depending on money that you may not actually earn. You also receive the benefit of having some extra cash on the good days. The combination of these two budgeting actions can create a solid cushion for your bank account.
The amazing part about budgeting, is that it gives you the opportunity to buy time. Your total monthly expenses are the price of one month of free time. As long as you don't change your spending habits, you can start saving to buy time.
Example: If your total monthly expenses are $2,500, then 3 months of free time cost $7,500. However, with lower expenses, say $1,750 in monthly expenses, 3 months of free time only costs $5,250.
By budgeting, you allow yourself the opportunity to create a cushion of time between jobs or for retirement with your savings.
