Making sure that you have enough money to cover everything you need every month can be a bit tricky, but it does not have to be. By learning how to budget your money every month, you could potentially cover all of your necessities and still have some left over.
Find Out What Your Income is After-Tax
When you want to come up with a budget to help get your finances in order, the first thing that you will need to do is find out how much money you receive on average after-tax. Regardless of the budget plan you decide to go with, it’s important to know how much your paychecks are. This way, you can figure out how to divide your money.
Decide on a Budgeting Plan
When you figure out how much money you get to keep after taxes and withholdings (should you have any through work), it is time for you to decide how you want to plan your budget. You can do this either on paper or electronically through various apps.
One of the most popular ways to do this is to use what is known as the 50/30/20 budget. This kind of budget plan helps you determine how much of your paycheck can go toward certain expenses so that you do not over spend in any one place.
Here is how it works:
50% Goes to All of Your Basic Needs
When using the 50/30/20 budget, half of your paycheck will go towards your basic needs. These are the necessary bills that you pay on a recurring basis.
Some of the basic necessities that this 50% of your paycheck should cover can include (but are not limited to):
- Basic utilities
- Minimum loan payments
- Child care/other expenses necessary for you to work
If the amount of money that you need to cover all your monthly bills exceeds half of your paycheck, then it will be necessary for you to dip into the next portion – the percentage that is meant to cover all your unnecessary expenses.
However, even if the amount of your paycheck that covers necessary expenses is less than half, you should still revisit these fixed expenses from time to time. By doing this, you can find a way to save money by getting less expensive insurance, refinancing a loan, or getting a better cell phone plan.
30% Covers All of Your Wants
After you have paid your bills and taken care of your monthly expenses, 30% of your paycheck can be used for things that you want, rather than things you actually need.
There are all kinds of things this portion could cover, including:
- Going out to dinner
- Going to the movies
- Getting a new video game
- Buying concert tickets
- Going to an amusement park
That said, there are times when figuring out if something is a want or a need can be difficult. For example, you might have a difficult time deciding if a gym membership or organic food is a want or a need.
20% Will Go to Debt Repayment and Savings
The final 20% of your paycheck after-tax will be used to pay back any debts that you have or put into a savings account to be used for a rainy day at any time that one may happen.
When doing this though, make sure that the way you divide your funds between savings and repayment of debt will benefit you in the long-run.
If you either want to get out of debt sooner, or just need more money this month to make a payment, it is ok to dip into the other percentages as well.
Keep Track of Your Current Progress
Always make sure to keep track of where you currently are with your monthly budget. There are a number of helpful online tools for budgeting and savings that will help you easily record your spending.
Make Your Savings Automated
If you want to make things even easier on yourself when it comes to budgeting, consider setting up automated payments to your savings account. By doing this, you can grow your savings with each paycheck without having to think too much about it.