Budget Plan 101 – Make The Right Financial Plan For You
Tuesday, June 3, 2014, 1:00 AM | Leave Comment
While we would all like to live a life where money isn’t a concern, the reality is that most of us will spend our lives carefully planning for our financial future. Making a workable and realistic budget is a large part of this and, if done properly, can actually be more freeing than restricting.
Nothing is more reassuring than knowing that you are financially responsible and secure.
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Know Where Your Money Goes
The first step to creating a budget is to know where your money is currently going. This can be daunting but will pay dividends in the long-term. Keep track of every purchase, every check cashed, and every automatic payment processed. No expense is too small that it should be ignored. If it cost a dime, make a note.
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Be Realistic
Just like going on a crash diet, many individuals become too conservative with their finances, leading to eventual failure. Living within your means does not mean you need to cut all of the fun out of your life.
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Know Your Priorities and Determine Realistic Spending Amounts
While no two budgets are exactly the same, there are some percentages that are generally recommended by financial professionals. As a rule, 35 percent of earnings goes toward housing and utilities and 45 percent goes toward “discretionary” items such as meals, clothing, vacations, and entertainment. The remaining 20 percent of your income should generally go toward your savings goals such as college and retirement savings as well as savings for more short-term purchases such as a new car or home.
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Save Save Save
The amount you save will vary greatly depending upon your income and other factors. However, 10 to 20 percent is the recommended amount. A great way to ensure you are saving the amount required is to set up a direct deposit to your savings account or accounts of choice. Whether it be a 401K, IRA, or other savings account, setting up automatic payments will ensure that you don’t spend the money before it gets to where it needs to go.
Ensure that at least three to six months of living expenses are saved in an account that you can easily access if an emergency were to occur such as an illness, layoff, or another unforeseen incident that might require some extra funds.
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Get Rid of Debt
Eliminating your debt, especially loans with high interest, is crucial to getting you on the right financial path. All of those interest fees you’re paying add up and can greatly impede your ability to both add to your savings as well as enjoy a more fun-filled lifestyle.
When it comes to paying off high interest debt, you will want to make as big a dent as possible. Calculate how much you can afford to pay each month toward these debts and pay it off consistently until your balance is 0.
In order to create successful budget, a healthy attitude is a must. Don’t see your budget as a limitation, but more as a helpful asset that will help you and your family to be financially healthier and more free in the future.
Above all, don’t get discouraged. Stay dedicated to your budget, even when you slip, and you’re sure to reap the benefits.
If you do slip and are in need of help, you can always get the help of professionals like Exelby & Partners Ltd, a Grande Prairie bankruptcy company, to give you financial advice. With this kind on help you won’t have to fear bankruptcy or financial woes of any kind.
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