Every kid looks forward to growing up and living their own, independent life. No one tells you that growing up comes with a steep learning curve when it comes to managing your personal finances. One of the most important aspects of that is creating your own personal finance budget.
If you’re new to budgeting, you might be wondering what it entails. You’re in luck! Read on to learn everything you need to know about it.
What Is a Budget?
In the simplest terms, a budget is a way of tracking and managing your money. It is a great way to learn about your overall financial health.
You’ll want to start by listing all of the money that you currently have coming in each month. This includes your pay from your job as well as any child support, alimony, etcetera.
You then want to list out all of your payments each month like your mortgage and credit card bills. What’s leftover is the amount of money you have to dedicate to other uses. The more money you have leftover, the better off you are, financially.
How Do I Set a Budget?
How you set your budget depends on your financial goals and your lifestyle. For example, if you want to improve your credit, you will want to budget more money toward paying down your credit card debt.
Financial experts recommend that you spend no more than 30 percent of your monthly income on housing costs. If you’re above that, then that might be an indicator that you need to make some changes by moving, taking on a roommate, or increasing your income.
You’ll also want to set aside money for expenses like groceries, gas, and personal items. Plan on putting at least 5 percent of your income into savings for emergencies.
Finally, set aside spending money for dining out and entertainment.
Don’t Forget Business Expenses!
It’s not unusual for a lot of small business owners to take on a portion of the business’s financial liability. If that’s true for you, then you want to make sure that you include any expenses you’re paying for out of pocket.
People in this situation also need to see how they can reduce their out of pocket costs. For example, if you’re paying for a payroll service, you can save money by learning about all of the things you can manage with a pay stubs maker. Less money on business equals more money in your pocket!
Ideally, you’ll want to increase your business’s financial success so you contribute less from your personal accounts over time. This will simplify your budget in a major way.
A Personal Finance Budget Is Essential to Success!
Creating a personal finance budget and sticking to it is a major first step toward financial success. It also helps you stay on top of your current financial situation so you can make smart financial decisions in the future. Don’t forget to leave plenty of money for fun in that budget to make your life even better!
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