If you are like most people, creating a budget tends to drop in the end of it. This is not a miracle! There are some on the budget, feels really limiting. Between career and personal obligations, our lives have enough structure. Who wants to pile on even more rules?
The thing is, the right kind of budget should be authorized, and not limitation. It should be able to get you to spend money on things that make you happy and still meet your financial goals.
I finally found a budget work for me, I am very pleased to be able to share it. Scroll through the five simple steps to begin building you.
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#1:calculation of monthly after-tax income.
First, you need to understand what your work. The key is to know how much money you actually take home per month after taxes and retirement contributions. If you don’t know these off the top of your head, view your last paycheck. If your salary fluctuates month, considering the average of your take-home pay over the past few months to get a better idea.
#2:Calculate your monthly living expenses.
Next, make your living expenses. These may be the bills you are locked into the or essentials you need to survive. If you take a pay cut to work, it will be very difficult to cut these items from the budget. Rent, mortgage, car payment, insurance, utilities, groceries and phone bills are all fair game.
#3: Determine your discretionary expenses.
Here is the best part. Such a representation of anything you spend money on for fun. Think of date night, Netflix, fitness classes, travel and Kindle books. (Or is that just my credit card bill?) These are discretionary purchases you can eliminate or delay, if things get tense. Estimate this number may be difficult, because it is different month. I like to use Personal Capital, a free online budgeting tool to keep track of my spending categories. For better or worse, it leaked exactly how much I(super)spent on the cappuccino.
#4:write down your financial goals.
After subtracting of your living and discretionary expenses from monthly income, how much is left? Ideally, this is the cash you will put towards your financial goals, which may include:
To repay the debt —If you have credit card or student debt, pay it is a priority. I clear guide to the payment of the debt will help you start.
The establishment of a contingency Fund —I recommend keeping three to six months of living expenses in a safe savings account. If your car breaks down, or your work, this will save you from dipping into retirement funds or take out loans. Everything you need to know is in my complete guide to an emergency Fund.
Contribute to the retirement Fund —If your employer deducted 401(k)or Ira contributions from your paycheck, this is where you will be classified. As part of the benefits, many employers will match the 3-6%retirement contributions. The use of this free money contribution of at least why your employer will match.
Start an investment account —If you are debt free, have an emergency Fund, and contribute to a retirement plan, Bravo! Consider opening an investment account, take things to a new level. The interest rate on the basic savings account of 1%or less, but can improve your return on investment long-term in the stock market. I personally don’t have the time or desire to select stocks and manage a portfolio, so I use a company to do that for me. In addition, they manage your first $ 15,000.
#5: Download and set up your 50/20/30 budget.
Now that you have out your monthly financial situation, how do you know if you are on the right track? This is 50/20/30 budget. The 50/20/30 budget is a guide for managing the revenue of the way, allowing for two savings. Here’s how it works:
- 50% Your monthly after-tax income should go the cost of living we summarize Step 2 in(rent, utilities, transportation, etc.).
- 20% Is assigned to financial goals, such as debt, savings, and investment. We discussed this in Step 4.
- 30% Can be spent on discretionary purchases Step 3(cable, gym membership, shopping, travel, etc.).
I would like to emphasize is that the 50/20/30 budget as a guide, not a rule. Someone in an expensive city may pay more than 50% of the cost of living. Have heavy student loan debt can be allocated more than 20% of the financial target. The budget is only a proportion of the guide to keep you in check. And it is not scary, either! The bottom line is that a successful budget is a flexible. It should give you the space to spend money on the things you value and still grow your net worth.