If you’re taking your first crack at building out your budget, there are some rules of thumb you can follow to help you avoid some common pitfalls.
Many of us check our bank balances only to be saddened by how little money we have in our savings. Maybe you can go without eating takeout four nights a week, or maybe you can’t, whatever your income there is always a way you can save a bit of extra cash at the end of the month.
#You’ll need to set out a saving plan
Do you have a goal ahead that you’re budgeting for? Maybe you’ve got a vacation to save for or a wedding. Whatever the occasion, you can start saving in small amounts, and by the time you’ve come to shelling out the money, you’ll have plenty in reserve.
50/30/20 budget: With a 50/30/20 budget, 50 percent of your take-home pay goes toward essentials, like housing and bills. Thirty percent goes to your money goals, such as paying off debt or saving for retirement, while the remaining 20 percent is your “fun” money, and can be used for discretionary expenses like entertainment.
#Keep it simple
If you’re a newbie, keep your budget as simple as possible. If you’re feeling stuck, begin by designating a dollar amount for each “bucket” or spending category. Stick to one approach and see how it goes. It’s easy to get overwhelmed by all the options out there, but the important thing is to get the ball moving.
#Include all expenses
Your expenses should include both recurring, fixed expenses, and one-off anticipated expenses, such as annual subscriptions, memberships, and insurance you pay for once a year. For one-time expenses, divide each total by 12 to include that into your monthly budget. That’ll give you a more accurate picture of your overall finances. Plus, by planning ahead like this, you won’t get blindsided when an annual bill comes in the mail.
#Always monitor your expenses
Once you get into the swing of checking your finances regularly, you can begin to alter your spending habits if they are not going to be sustainable within your set budget. Try not to change the budget but instead your spending habits, this way you’ll be more likely to stick to the budget instead of breaking it often. Make sure when setting your budget you give yourself some room for emergencies. It is no good spending the maximum of your income as you won’t have any in reserve when the time comes for needing it.
#Plan for spontaneous spending
When you’re putting some money aside for a rainy day fund, try and put a little extra aside that you can give to yourself as a little reward. Think of it in dieting terms, you may be familiar with the term ‘cheat day.’ Often when people are sticking to strict diets they will allow themselves a cheat day where they can eat whatever they want, but only for one day in a month. Set a little bit of money aside each month to allow you your very own financial cheat day. This will give you the satisfaction that spending money and shopping can bring without breaking the budget – because you’ve budgeted for it!
Do you have a goal ahead that you’re budgeting for? Maybe you’ve got a vacation to save for or a wedding. Whatever the occasion, you can start saving in small amounts, and by the time you’ve come to shelling out the money, you’ll have plenty in reserve.
50/30/20 budget: With a 50/30/20 budget, 50 percent of your take-home pay goes toward essentials, like housing and bills. Thirty percent goes to your money goals, such as paying off debt or saving for retirement, while the remaining 20 percent is your “fun” money, and can be used for discretionary expenses like entertainment.
#Keep it simple
If you’re a newbie, keep your budget as simple as possible. If you’re feeling stuck, begin by designating a dollar amount for each “bucket” or spending category. Stick to one approach and see how it goes. It’s easy to get overwhelmed by all the options out there, but the important thing is to get the ball moving.
#Include all expenses
Your expenses should include both recurring, fixed expenses, and one-off anticipated expenses, such as annual subscriptions, memberships, and insurance you pay for once a year. For one-time expenses, divide each total by 12 to include that into your monthly budget. That’ll give you a more accurate picture of your overall finances. Plus, by planning ahead like this, you won’t get blindsided when an annual bill comes in the mail.
#Always monitor your expenses
Once you get into the swing of checking your finances regularly, you can begin to alter your spending habits if they are not going to be sustainable within your set budget. Try not to change the budget but instead your spending habits, this way you’ll be more likely to stick to the budget instead of breaking it often. Make sure when setting your budget you give yourself some room for emergencies. It is no good spending the maximum of your income as you won’t have any in reserve when the time comes for needing it.
#Plan for spontaneous spending
When you’re putting some money aside for a rainy day fund, try and put a little extra aside that you can give to yourself as a little reward. Think of it in dieting terms, you may be familiar with the term ‘cheat day.’ Often when people are sticking to strict diets they will allow themselves a cheat day where they can eat whatever they want, but only for one day in a month. Set a little bit of money aside each month to allow you your very own financial cheat day. This will give you the satisfaction that spending money and shopping can bring without breaking the budget – because you’ve budgeted for it!
