And remember, you may need to try several methods to find the one that works best for you. Writing income and expenses down isn’t the only way to approach budgeting consider these alternatives. As shown in the image below, you would allocate 50% of your income to essential expenses, such as housing, transportation and groceries 30% to flexible expenses, like dining out and entertainment and 20% to savings to cover unexpected costs, build an emergency fund, and meet personal or family goals, such as college planning, travel, and retirement. One common method to break down a budget is the 50/30/20 spending plan. Long- term savings allows you to build wealth, invest and eventually retire. Short-term savings goals might be a vacation or concert tickets. Once you build your emergency fund, you can start working on short– and long–term savings goals. Having an emergency fund turns a potential crisis into an inconvenience and helps you avoid busting your budget. Even if you can only save $10 a paycheck, that’s a start. A budget helps you plan for expected expenses, but what happens when your car breaks down, you need to go to the emergency room or you get a parking ticket? Create a savings category in your budget so you won’t panic when you have a sudden, unplanned expense. Unfortunately, there’s one more type of expense: unexpected. If you choose a premade budget template, remember to customize it with categories that fit your lifestyle and spending habits. Use your spending categories to create your budget, using our customizable budget calculator, an app or spreadsheet. Others are more specific to you, like entertainment or trips to the coffee shop. Some categories are obvious, like food and rent. These patterns represent your budget categories. For at least one month, write down everything you spend even small purchases like a pack of gum or snack out of a vending machine.Īfter you’ve tracked your spending, identify patterns. Tracking your expenses can help you plan for variable expenses. Variable expenses are a bit harder to plan for, because they often change – like fuel, groceries and utilities. Rent is a great example of a fixed expense. Fixed expenses are easier to manage, because they don’t change from month to month. ![]() There are two types of expenses: fixed and variable. Whether you change your spending habits is completely up to you.Īdd up your paystubs, tips and yes, even financial support received from your family to determine how much income you bring in each month. It’s an empowering tool that lets you to see at a glance where your money is going, no matter how much or how little you have. A budget is simply a plan for spending your money. ![]() “I don’t have many bills so I don’t need one.”īudgets may not thrill you, but having more money will.Set up a budget, also known as a spending plan. ![]() Looking for the secret to financial success? The answer is the same whether you have $50 in your pocket or $5 million.
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