Saturday, July 20, 2013

How To Write A Budget

I think people have a hard time saving and investing due to the fact that they don't write down what they have and what they spend. If you write down what you will spend you are more likely to stick to what you write down. If you are sloppy with your finances you will end up losing money it's simple you have to learn to respect money. Before you right down your budget make sure you keep your money safe in a neat and tidy manner have a change jar and count it up at the end of the week; nothing must go to waste. Use your budget to reach a goal. The goal can be to buy a house, to be financially free, to get married or just to have extra cash so you can retire young if you like. This an example of a monthly budget for someone making $2500 after taxes:

Rent/Mortgage  - $1000
Food                    - $500
Clothes               - $200
Utilities                - $120
Entertainment   - $300
Car                       - $300
Misc                     - $100

Yes, writing a budget is good but if you are spending more or close to the amount of money you are making drastic changes need to be made. Don't ever use a credit card to buy more than what you can afford. If you don't fully understand how to use a credit card wisely then please consider not having one or only using it until you do some research on the dangers of using credit. If you have debt pay it off ASAP, there is no point of getting 1% interest on your savings if your debt comes with an 18% APR. Assuming your debt is paid off this is what your budget should look like:

Rent/Mortgage - $750 (rent should be about 30% of monthly income)
Food - $250 (don't eat out as much/pack healthy lunches)
Utilities - $100 (energy saving light bulbs and energy star products,unplug appliances not in use)
Entertainment - $0 (YouTube, Hulu, Library books/movies, museum)
Car - $300 (you should buy used,if you live in the city that should be the last thing you buy)
Misc - $50 (clothes should be bought as a need not as a way to feel good or splurge)
Savings - $1050 (this can be used for emergencies but mostly to be able to invest later on)

If you are not saving a good amount of money you must make changes quickly. Get another job if you have to and find other sources of income. A budget will help you keep track of expenses and make you more accountable. Saving and being strict about not spending in excess will make the difference whether you live a life free of unnecessary stress that comes with living paycheck to paycheck or whether you stay stuck in a job you don't like for life.

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