Budgeting Do’s and Don’ts
Every budget consists of necessities, wants, and savings. Some budgets also require repayment of debt. The 50/30/20 rule is a great place to start when it comes to budgeting. Leave 50% of your budget to necessities, like rent, utilities, food, and child care. 30% of your income should go to wants, like new furniture or going out. The last 20% should go toward savings, paying off debt, and charitable contributions.
Identify your monthly income after taxes. Figure out your necessary expensenses, expenses that go toward wants, and how much you spend on savings and debt. Set long and short term goals for paying off loans and debt. Short term goals can consist of paying off a credit card or building up your savings. Long term goals are for your retirement or paying off student loans. Keep track of all of your expenses by using a budgeting app or spreadsheet.
Don’t set unrealistic goals you can’t keep up with. Skipping out on saving for retirement is a big money-waster, as well. Emergency savings are important, but retirement funds like a 401(k) or IRA grow more over time. Don’t skip out on your wants, because a needs-based budget doesn’t allow for fun money. Everyone needs a little extra for fun! Don’t compare yourself to others and stay in your lane. Your financial situation may be different from your friends’, so stick to what’s best for you and don’t worry about what others are doing.
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