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Budget

Get You Budget Right by Managing Your Personal Finances

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If you wish to stay afloat in your personal finances, it is important to maintain a proper household budget. Without maintaining a proper household budget it will become very difficult to efficiently manage where your money is spent. In order to make sure you stay away from a misguided budget, you might want to follow a few general guidelines in order to get your budget right.

Get You Budget

In Home Expenses

Housing expenses are the biggest and most costly part of any budget. Thing that you should make sure to include while writing out this budget are your:

  • Rent/Mortgage
  • Home Insurance
  • Taxes
  • Home Modifications
  • Utilities, such as, electricity/gas/water/trash/sewer/phone/cable and internet

Of course, the rent/mortgage is the biggest part of this budget and should account for about 25% of your budget. All in all, with everything listed included your budget expense here should be about 30-35% of your monthly income.

Everyday Expenses

Living expenses is a very broad category to try to narrow down into a list. Many people will find themselves overspending in this general budget because there are so many different things to consider. In order to get your budget right, these expenses should only account for 20% of your monthly income. Things to include in this category are:

  • Groceries
  • Eating Out
  • Entertainment
  • Healthcare
  • Clothing and other Personal Items
  • Gifts
  • Monthly Subscriptions
  • Cable/Internet

Budgeting your Transportation Expenses

Transportation is a necessity in order to run errands, get to work and travel. It is possible for this section of the budget to become very expensive, especially if you are making payments for your vehicle. While planning for your transportation budget, it is important you try to stay at or below 20% of your monthly income, in order to get your budget right you should account for your:

  • Loan Payments
  • Expenses on Gas
  • Vehicle Insurance
  • Maintenance and Repairs
  • Costs for Parking
  • Toll Roads

If you do not own your vehicle but are using a means of public transportation, you might wish to substitute the loan payments and gas expenses for the fares it costs to use whatever form of transportation you are using, whether it is bus, taxi or subway fares. If you are planning on buying another car in the future, get your budget right in the future by adding your savings as part of this category.

Debt

In order to get your budget right you will wish to make a means of saving some extra money each and every month. This is often a difficult task to accomplish, especially if you are dealing with debt. Once you have focused on and figured out the rest of your budgeting expenses, it is important to turn some of your focus onto your savings account. If you have debt, it is important to focus on paying that off before focusing too much on your savings account. Make sure to try to keep your debt repayments at a minimum of 15% of your overall budget.

Savings

Many people think that having a savings account is unimportant, especially while they are busy paying off other debts, this could not be more wrong. Including a savings system into your budget is very important, especially in dealing with unforeseen emergencies, as well as your investment savings. If you have other forms of investments other than your 401k plan, you should put that in your budget here. Make sure to only use about 10% of your savings plan in this category.

Free of Charge

If you have managed to stay out of debt and are simply looking at getting your budget right. You might want to consider using the 15% of your debt repayment budget and putting it into your savings budget, this would put you at saving 25% of your monthly income. Many people might consider 25% of your monthly income as savings might be too high. But if you think about it, it’s really not that high. Although it is promised, there is no guarantee of receiving your social security benefits after retiring and with the inflation rates the cost of living will only rise throughout the years. If you think about your savings, when you reach retirement, wouldn’t you rather have more than enough money, or not quite enough?

Breaking Down the Budget

Let me break it down for you so it is easier to get your budget right.

  • 35% of your monthly income should go to housing costs
  • 20% is for your everyday expenses
  • 20% is for costs of transportation
  • 15% is for Debt repayment
  • 10% for savings

When deciding on how to get your budget right this categories should be your main point of focus. It is important to balance your ratio in each category, if you have debt and wish to pay it off more quickly, then you might want to consider taking a percentage out of one category and using it in your debt repayment category and so forth.
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Essential Financial Habits That Make Life Easy

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You can live a financially comfortable life if you adopt these essential financial habits. We are going to give you the tools and tell you how to apply them it is just a question of whether you are going to provide the necessary “elbow grease” to put these habits into practice.

Essential Financial Habits

Keys to Financial Independence

There are people who think that you are either born rich or need to win the lottery to enjoy financial freedom but that is not the case. Everyone can enjoy some measure of financial freedom you just need to apply two (2) concepts and you will do fine. First is develop a budget, The only way you can reach your goal of financial freedom is by making a plan and start saving, save anything you can but start saving something. The more you save the less you will need in the future, save a minimum six (6) months living expenses before you do anything else. These savings are vital to give you peace of mind and stay away from debt.

Document All of Your Financial Transactions

You need to figure out where all of your money is going before you can find savings. Get receipts for everything you spend throughout an entire month then write down all of these transactions and why you had to spend money. While reviewing these sums you will realize that that premium coffee you have in the morning costs you a few hundred dollars in the run of a month.  By scrutinizing all of the transactions you will be able to find savings and these savings can be put into your emergency savings fund.

Stick to Your Budget

What is the point of making a budget if you are not going to follow it? Your budget needs to be realistic and have allowances for entertainment and other activities or you will become bitter and eventually break the budget.  You need to account for everything from food, rent/mortgage and transportation. If you have extra money left over at the end of the month then you can save that cash or use it and treat yourself to something you like.

Save Often and Never Stop Saving

When it comes to essential financial habits savings is by far the most important. It does not matter how much money you make it is how much you keep. The more money you can save the more stability you will have in your life. There is a simple strategy you could follow which is “pay yourself first”. This is something that most people don’t do much to their regret. When you pay yourself first those funds are set aside. If you paid everything then whatever was left would be used for savings you would have next to nothing because there is always something to take your money.  Start by saving 10-20% of your regular earnings and when you get a bonus put that in there as well. Look for tax free savings accounts that will help you increase your savings without being ravaged by taxes.

Do Not Touch These Savings

Once you have the minimum of 6 months emergency savings put aside you should only use that for legitimate emergencies and not on shopping excursions. Anything you have beyond your 6 month reserve should be invested in high return investments tht will give you a better bang for your bug. The more money you save the better it will be for you and your family. This does not have to be complicated but some people get apprehensive when you mention the words “budget” and “savings” in the same sentence.

How to Track Your Progress

How do you measure your financial success? When establishing these essential financial habits it helps to have the right perspective or you could find yourself suffering emotionally. There are some people who save too much and lead a miserable life and others overspend and end up in a financial mess. What you need to do is take a balanced approach to this problem by first identifying the primary reason people cannot save money and that is debt.

All of these are enemies of your financial well-being, Individuals who use these debt instruments are not able to save and since these credit facilities charge you interest you are losing money twice. The first time you are losing money is when you spend needlessly and the second is when you have to pay interest which runs contrary to the essential financial habits we have been reviewing. If you stick with the suggestions we have provided and are patient you can lead a comfortable financial life that will meet all of your needs and expectations, remember the famous song by the Beatles “can’t buy me love” so keep that close to your heart, money can’t buy happiness and you will always have a smile on your face.