How to Set and Stick to a Budget
December 24, 2020
We are continuing our financial New Year’s resolutions discussion with how to set up and stick to a budget. Read on to learn some tips to create and stick to a budget.
What is the purpose of a budget and how does it help?
A budget provides a use for every dollar you have. It is a tool to help you, not to keep you from enjoying life. A good budget is one you’ll stick with, so make sure to include some room for fun.
To set up a budget, start with your take home pay, and then subtract your ongoing expenses, such as housing, food, and insurance, as well as irregular expenses, including gifts, car registrations, and vacations. You also want to include any goals you have, such as saving a certain amount a month or paying off debt.
Once you have that information, try following a budget method. One example is the 50-30-20 budget. It works like this:
50% of your income is allocated toward needs:
* Basic utilities
* Minimum loan payments (additional payments fall under savings and debt repayment category)
* Child care
30% for wants:
* Dining out
20% to savings and debt repayment:
* Emergency fund
* Retirement savings
* Debt payments (credit cards, student loans)
If one of your goals is to eliminate your debt quickly, you may decide your wants can wait until your debts are more under control. To help you stick to your budget, don’t make it so strict that you can’t buy anything just for fun.
Take a look at your budget each month and make adjustments as needed. Priorities and expenses change over time, so be open to modifying your budget. It’s also a good idea to set up automatic deposits for your savings.
Creating and sticking to a budget is a great way to keep track of where your money is going. You can make adjustments along the way to help you reach any financial goals you have set. Give it a try in 2021!
Tags: Budgeting, Money Management, Tips and Tricks