Authored by Pier Yvette Alsup, American Eagle Credit Union
Budgets: They aren’t just for the accounting department.
They are for you. And, they’re helpful.
The only way to really maximize your “MONEY LIFE” is to know where your money is coming and where it’s going. And this starts with a solid budget. Building a budget you love means having a budget you can follow.
If you’re new to budgeting, it’s easy to get started by following the 50-30-20 Rule:
50% = Needs
Needs … these are the things you can’t do without: groceries, housing, utilities, health insurance, and transportation. Most of the time, these amounts are consistent, but it is important to review them regularly. Ideally your “needs” should account for 50% of your take-home income.
30% = Wants
So just about now you might be thinking “Hello new fall wardrobe!” But, wants aren’t necessarily extravagances. They are the basic niceties of life, once needs are covered. They can be considered “flex costs”, like your cable plan, your cell plan, or your lawn service. If your wants are higher than 30% of your take-home income, ask yourself which of them can be cut or reduced from your monthly budget. This can be tough!
20% = Savings (and Debt Repayment)
Saving money every month is important. It can help you cover unexpected expenses as well as achieve your long-term financial goals. Be sure to pay yourself your 20% each month!
So maybe just about now you’re asking yourself “what happens if I take a hard look at where and when I spend my money and my 50% is really 60%, and my 30% is 40%, and my 20% is Zero? How can I get my budget in line and have one I love (so I can follow it!)”
First, take a hard look at where and when you spend your money and make small changes that will stick.
If your housing costs are high, maybe consider getting a roommate. If you eat out more than you eat in or need to be among the first with the latest and greatest tech gadgets, recognizing these habits is the first step. Once you’ve identified where your money is going, choose one or two changes to help you gain more control. Maybe pare back your cell or cable plan. Or limit the number of times you eat out a week. Don’t try to knock down all your spending at once. Start small and see steady success.
And remember: be sure to make room for fun stuff.
A budget is not a set of handcuffs. It’s knowing and controlling where your money is coming and going. Much like a diet, if you cut out all the foods you love, it’s tough to follow … so be sure to include some fun.