When you are learning how to budget your money, it can be frustrating to understand how much money should be allocated to specific costs. There are a lot of people that cannot successfully make a budget because they do not understand what is realistic or how they can be sure that they are going to be able to stay within the budget that they set. As you set up your budget, you may want to stick with the 50-20-30 rule. This budget can work with a variety of individuals and ensure that you are spending the money that you need to survive without spending too much money.
First, Cover The Essentials.
First, you will want to start with the fifty percent. No more than fifty percent of what you make should be going to your essential costs. These costs are the costs that are going to be required to ensure that you are able to live. The cost of your shelter, heat, food, etc. is classified as your essentials. You should be sure that you divide your essentials into only four main categories. These categories will be housing, transportation, utilities and groceries. If only half of the money that you are earning is going to your essentials, you can be sure that you are able to save some money and enjoy some of your money.
Second, Cover Financial Priorities
The twenty percent of your money should be going to your financial priorities. This means that you want to make sure that you are making your debt payments such as credit card payments, short term loans or making investments with this money. Some people like to take this money and contribute it to their savings account or even to their retirement accounts. You will want to find your financial priorities to ensure that you are able to create a sound financial base for yourself.
Third, Allow For Lifestyle Expenses
The thirty percent of this rule is dedicated to your lifestyle choices. You want to make sure that this money is able to go to the personal expenses and fun choices. Some of these may be bills that you choose to incur, such as your cable or even internet and phone plans. You want to make sure that you take into account all of the monthly bills that are not necessary that will fall into this category. It can be difficult to realize how much money you are spending that is not exactly necessary to be able to live.
Once you have outlined your 50-20-30 rule, you will want to start keeping track of the money that you are spending. There are a lot of people that struggle keeping a budget simply because they do not do a good job at keeping records of the financial choices that they are making. You should be sure that you are keeping track of all of the financial decisions that you make. This way, you can be sure that you know where and when you are exceeding your budget. Once you know this information, it can be easier to make the necessary cuts to ensure that you are going to stay within your budget.
As you get used to your budget, you can be sure that you are flexible with your numbers. You want to make sure that you essential costs are no more than fifty percent of your budget. If you choose to keep this cost lower than fifty percent, you can take the extra money from this area of your budget and contribute it to different parts of your budget. You don’t want to be afraid to tweak your budget as you are learning how to live by it.
When you find a good breakdown for your money, you can be sure that you are paying all of your essential bills while still being able to save money for later. Sticking to a budget can be difficult at first, but you don’t want to get discouraged. If you do not quite stick within the budget, figure out what changes you can make and make sure that you effectively make those changes. Once you have made those changes, you can continue to make small tweaks in your spending to stay within your budget. Just because you exceed your budget one week or one month does not mean that you can’t get back on the horse and start focusing your energies on staying within the budget for the next round.
Budgeting is a great way to ensure that you have financial freedom. Don’t be afraid to set yourself a budget and then train yourself to stick within the budget throughout the time that you are working on saving your money and being wise about your financial situation.