How To Build a Budget You Can Live With
If you aren’t living within a budget, I highly recommend you do so and the sooner the better. According to a study by the NFCC, 60% of adults in America don’t use a budget to manage their personal finances.
It’s a leading factor in the financial health and success of Americans in general.
Budgeting is living within a framework that you create with the goal of ensuring that you consistently have enough money for necessary expenses. It also allows for expenses for things you want but don’t necessarily need. Working regularly with a budget can help keep you out of debt and even save money for important things like retirement, large purchases or even travel. Simply put, a budget can help you get more out of life.
Build a Budget That Works For You
Budgeting has many benefits, which we’ll get to later. First, assuming you’re not living by a budget, let’s discuss how you can build a budget you can live with.
We have an excellent guide, designed to help you budget like a pro. I welcome you to read through it as you build your budget. It is a comprehensive, step-by-step guide that will help you shape your budget.
Budgets can falter for various reasons. Some are difficult to prevent such as a change in income, or a loss of a job or cut in hours, unexpected expenses like vehicle repairs, medicals bills, and many others can create an immediate need to review and adapt the budget.
I believe that allowing yourself a regular cushion of funds can help augment certain unexpected expenses and make your budget easier to live within.
One popular method for creating a budget is to follow what is known as the 50/30/20 rule. Essentially, this budget recommends that you use 50% of your take home income for necessities, 30% for wants and 20% for savings and paying debt.
Use the 50/30/20 budget calculator below to give yourself an idea of how your money would be allocated. You may find this approach is indeed doable and that you could save enough to mitigate any short term unexpected expenses, thus making your budget one that works for you.
50/30/20 Budget Calculator
5 Important Reasons You Need a Budget
1. Helps You Understand How You Spend Money – You may feel like you know exactly where your money goes, but until you account for every penny spent, it’s likely you have money going out that you’re either unaware of or don’t realize the impact on your total income.
2. Helps You Understand Your Relationship With Money – In my opinion, knowing how you view and feel about money is vitally important. Many spending issues arise from our personal relationship with money. Take the Spending by Color quiz found in the Money Fit Academy (https://moneyfit.org/academy) for help on identifying your spending personality.
3. Helps Keep You From Mini-Emergencies – We’re human and thus we are prone to mistakes. It’s simply nature. So when we rely on tracking all of our receipts in our head, it’s likely that one might slip by and that’s pretty dangerous to our short term finances, especially if we’re living paycheck to paycheck like 78% of US Workers do. A mini-financial-emergency could consist of not being able to afford fuel for our vehicle, or skip what should be a necessary doctors visit.
4. Helps Keep You From Mega-Emergencies – Unlike having trouble paying for fuel until payday, a mega-emergency can mean having no transportation if something were to happen to your vehicle. It means taking serious financial risks by not carrying health or auto-insurance and then needing coverage. It can mean losing your home or being unable to put any food on the table. Often times these mega-emergencies can lead to bankruptcy. The longer we budget and save the more likely we are to avoid the worst financial disasters.
5. Helps You Keep Your Peace of Mind – A budget is a safety net of sorts. It allows you to keep control of your money, rather than let it control you. It helps prevent the pain of unexpected expenses by allowing you to build your savings. Essentially it can help improve many facets of your life by allowing you to focus your energy on important, future oriented goals, rather than worrying if you’re going to make it to your next paycheck.
Start Building Your Budget Today
You can build a budget that you can live with without making life difficult for yourself. It takes some effort, especially when you start because good habits don’t typically happen overnight. Take it from someone who mentally budgeted for years, having it on paper makes everything so much better. If it works for me, and countless others, it will work for you too.
If you have any questions about how to build a budget you can live with be sure to comment below. Either myself, or a member of the Money Fit staff, will respond shortly. If you’d like to talk to someone and get help with building or reviewing your budget we invite you to call us at 1-800-432-0310. The call and budget review are free and confidential.