How to Create A Budget And Stick With It
Money makes the world go round. We need money to eat, have a mode of transportation, and for a dry place to sleep. It’s the main motivator for businesses and entrepreneurs alike. We all want a piece of the pie, but sometimes it’s hard to manage it. There are times where it feels as though the money slips through our hands faster than it came in. It’s time to take a hard look at some of the things that you’ve been spending your money on, and set some boundaries up for yourself. Think of it as taking control over how much money you have, rather than letting it control you.
- Determine Your Take Home Pay: Calculate out exactly how much you make per week, month, and year to have a starting point. Only look at what you take home, and not how much you actually make. After taxes, and fees are taken out, see what actually makes it to your bank account for you to use each year. Do not calculate in money like bonuses and tips as part of the take home pay. This money is not guaranteed, and therefore cannot be added into the take home pay.
- Figure Out Your Monthly Expenses: Look at the expenses that you have that must be paid. This includes things like, rent, insurance, phone bill, etc. These are things that you have to have and are taken out each month. Calculate up exactly what number you need to live. On average, this should be about 65-75% of your income. There are different models for managing your money. There’s the 50/30/20 method and the 80/20 method. The first would say that 50% goes toward the necessary items, 30% goes towards things you want, dining, and entertainment, and 20% goes into savings and debt. Otherwise, the 80 goes towards the necessary things, and the things that you want, while 20% goes towards savings and debt repayment.
Write out the things that you like to do and buy that aren’t necessary, and look at their value. If you are struggling to save, then take a hard look at what you are spending your money on. Try and do without a few extras so that you can save more each month.
3. Create Savings and Debt Payoff Goals: 20% of every paycheck should go into savings or to pay off debt. Divide that up into even smaller pieces to make every penny count. 5% should go into a retirement fund, 5% should be tucked away for a vacation or something special. Another 5% should go towards emergencies as a “just-in-case” measure, and the last 5% goes towards paying off debt.
Set up an automatic withdrawal from your checking to your savings to help you keep on track with your savings goals. You can have your workplace automatically withdraw a percentage to go directly into a retirement fund. Stay focused on the end goal, and you’ll see more and more money accumulate each day in your bank accounts. Managing your money wisely isn’t a punishment–it’s protecting yourself from the hazards of a rainy day, and giving you the freedom to enjoy a nice vacation without the worry of overspending.