A Simple Budget

According to an article I read recently a good rule of thumb for where you should be spending your money is as follows:

25-30 percent on housing

15-18 percent on transportation

16 percent on food

The remainder to be divided between discretionary spending and saving

Do you know if your spending is in sync with this breakdown? Have you ever prepared a budget to see where your money goes to? Creating a budget helps you spend responsibly and achieve your goals. It also helps eliminate stress. Wouldn’t it be nice not to have to stress over money! You’d also be able to avoid that “money” argument because you’d always have the answers!

You want to make sure your basic needs are met every month, and hopefully leave enough to fulfill your wants. For example, I want a new car, so I’ve set up a budget to help me save up for a good down payment. By being able to see exactly where the money is going I can make adjustments in my spending.

Setting up a budget is fairly simple and if you use financial software that will make it even easier. The software will allow you to run reports showing all your spending habits already broken-down into categories for you. Some even have the ability to create the budget and then you can make any necessary adjustments.

To create your budget by hand:

List all your income. Include in this figure any money you have coming in on a consistent basis.

List all your expenses. The payments that are the same every month are fixed expenses and should be listed first, then your flexible expenses.

Hopefully your income exceeds your expenses. If not you’ll need to adjust those flexible expenses. You want to have a cushion here. You might even need to start thinking of ways to bring in more income. Whatever you do, don’t start using those credit cards that will only increase those flexible expenses and create more of a deficit.

Most financial experts suggest that you need to save anywhere from 3 to 12 months worth of expense money in an “emergency fund”. For a lot of us that might be hard to accomplish but you should make this one of your financial goals. If you set goals or have wants (my new car) you are more likely to stick to your budget. What wants and goals do you have right now? Do you think setting up a budget will help you accomplish your goals and reward you with your wants?

Thanks for reading and have a great day!