Your Financial Recipe to Budgeting
February 13, 2020
Successful budgeting is like mixing together the perfect ingredients in a recipe. Follow this five-step financial recipe to figure out the best plan that works for your financial goals.
Step 1: Decide what you want to make
There are many factors involved when it comes to creating a budget. Determine your financial goals and how much time you need to accomplish before creating a financial plan. Are you saving for a new car? Are you working on paying off credit card debt? Do you need to create an emergency fund? Your answers to these questions will help create a financial recipe for a plan that works best for you.
Step 2: Gather and measure your ingredients
Before you can create your recipe, you need to evaluate all of the money you’re bringing in and taking out each month. You can start by calculating the income you brought in after taxes and how much you spent in the past two months. Be realistic with your spending and don’t forget to include any unexpected expenses like home repairs.
Step 3: Carefully mix ingredients together
Once you understand your goals and the ingredients involved with creating your financial recipe, it’s time to prioritize. A good plan to start with is the 50-30-20 rule. This plan allows you separate your spending into three basic categories: 50% on needs, 30% on wants, and 20% on savings. This plan may not work for everyone and there are many other plans to choose based on your situation, but it’s important that all of your ingredients blend together to create a successful recipe. You don’t want too much or too little of some ingredients and it’s important to measure carefully for a good recipe.
Step 4: Taste test then let simmer
Once you’ve mixed all of your ingredients together, try your financial recipe for a couple months. Your recipe is probably not going to be perfect the first time you create it, so it’s best to review your plan on a regular basis. A lot of us have trouble balancing our budgets if we don’t adjust our original plan. Ask yourself these questions: Do I need to cut back on my spending? Can I set more aside for an emergency fund? Am I on the right track to paying off debt? Make any necessary changes to your recipe as time goes on.
Step 5: Add some extra flavor and enjoy!
For a successful and healthy financial recipe, you’ll need to live within your means, but remember to treat yourself once in a while. Money is always coming and going so it’s important to not stress over your financial situation, and make adjustments when appropriate. Over time, you will discover what works best for your financial recipe and the perfect budget will become easier to follow.