Creating a Budget That Allows You To Save and Spend
Maybe you’ve got college debts to pay off. Maybe you’re debt free but are a forward looking individual preparing for financial freedom well before you hit the half century mark.
Wherever you fall on the personal finances continuum, if you want to save and get ahead, the first thing you need to do is create a budget.
Without a budget you really can’t accurately judge where your money is going, how much you can afford to spend on a Saturday night out, if bringing your lunch everyday is enough to get you closer to your financial goals.
There are lots of ways to go about creating a budget. Here are a couple of straightforward ones you could try.
Before you can create that budget you need to have an idea of how much money you actually spend. Make a list of all your expenses, groceries, gas, monthly bills, gym membership, pet costs – everything you can think of.
Some of those expenses are fixed. Like you gas bill and your phone bill. There is no wiggle room. Some of your expenses are flexible, like groceries and clothes. Divide all your expenses into two columns, fixed and flexible. Now you have a concrete idea of exactly what you’re working with.
With this extremely straightforward method, all you do is add up all your monthly bills. Subtract that from your take home monthly income and see what’s left for savings. If there is nothing left or not as much as you were hoping to put away then where you can skim from that flexible column. Maybe cut back on groceries and movie nights.
50% goes to your fixed costs. Rent, utilities, bills you see month after month go here
20% is allotted to financial goals. This is money that goes towards savings or towards paying back debt or towards creating an emergency fund.
30% is for your flexible spending. This is where the grocery money comes from, hobbies, clothes, entertainment.
By doing a thorough examination of how much you have coming in and where it’s currently going out it’s much easier to create a budget you feel comfortable sticking to as you work towards achieving your financial goals.