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Separate low-income/high-income budget considered helpful

Submitted by Jeff on May 17, 2008 - 13:32.

Aside from the real monthly budgets, I find that a theoretical budget for understanding what happens if you lose your job or switch to a lower-paying job is very informative for long-term planning. Mine has two columns of amounts for every item. The first column is Required (to avoid mutiny) and the second column is If income allows. They can differ because of extra expenses associated with more income or less time (e.g., more gasoline and prepared foods) or extra consumption enabled by the higher income (e.g., cable TV and NetFlix).

Each is totalled in both net and required pre-tax income, making it easy to see what would need to be pulled from savings (job loss) or what must be earned (change of job). Some may wonder if is worth earning more to cover the additional consumption or expenses.

 

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