Why We Should Monitor Average Values In Our Budget?
The term “mean” is associated with specific mathematical definition and it is about the average value of multiple numbers. Mean should be clearly measurable and it could be applied directly toward money management and personal budgeting. There’s an age-old question that asks us whether we are living beyond our “mean”. This could also mean that whether we live beyond our average monthly income. It means that we need to understand our average monthly income. Calculating our average monthly income should be quite easy. We could calculate the sum of our monthly revenue in the past 12 months and divide it by 12. This should be useful if we don’t have fixed amount of salary, especially if we own a business with fluctuating monthly incomes.
In order to fully understand our situation, it is a good idea to collect data related to our normal income and expenses throughout the year. We could continuously count the average value of the last 12 months to give us constantly updated average figure. This should give us an indication on how our average revenue fluctuates and this is something that we should keep our eye on. Life happens and everything could go up and down. Many things in our lives are highly variable and unpredictable. Such a variability could make it difficult for us determine patterns or trends.
Regardless of our situation we should try to stay on budget. It doesn’t really matter how much money we have it is important for us to reach our goals. By monitoring our averages it should be easy to spot unfavourable trends and make proper responses. When we make decisions based on our average values, we should consider multi month income and expense data. This means that huge spikes of expenses in July and August could have an effect on how much we should spend on December.
This should mean that focusing on average values could make us relatively immune to distractions caused by variability of monthly income and expenses. We would know where we are, we would be and where we have been financially. It should be possible to plan our future with enough information and reliability. It should also be much easier to address debts and stay away of them by focusing on our average values. This basic mathematical concept can be applied not only for finances, but also other areas in our lives.
It is also important to make a monthly list of income expenses, so we could compensate two particularly bad months with three good ones. We could continue to apply this technique and with could get many improvements in our financial situations. Things will eventually work well regardless of our situation; in this case we should always be able to avoid living beyond our means. The basic of achieving good financial situation is always the same that is to make sure that our income is always larger than our expenses.