The first 10% of your income goes to retirement savings. The next 40% is further broken down into four (4) simple categories. The first 60% of your income accounts for all your living expenses. Instead of create a several categories for debt or specific bills, you split your money by 60/40. The 60% budget is popular because you use rations rather than categories to manage your money. Are you fully funding an IRA or a 401k? If you are, then maybe you are ready to move into other investment opportunities. If you feel comfortable with your savings and debt payments, there are tons of investment opportunities for you to choose from. At the very least, you can put extra money into a savings account. The extra money not spent needs to go toward something such as paying off a credit card, a car or mortgage. This means you will have a good cushion in case of an emergency starting off. One main aspect of a good zero-sum budget is to use last month’s income to pay the current month’s bills. You will always know exactly how much you spend in each category. You will allocate money to go to savings, paying off debt, paying bills, entertainment and so on. When you have a zero-sum budget, everything is put into a category. You want to make every dollar work for you and have a specific purpose. Zero-sum budgeting forces you to spend every dollar you make, but not in a bad way. The goal of this budget is to have zero at the end of every month. This budgeting system can be the most beneficial to some people. This system operates the same as actual envelops, but the app creates a virtual environment. After that the cost is relatively cheap at $5 a month or $45 for the year.
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Goodbudget is free for up to 10 virtual envelopes.
If you don’t want to use actual envelopes there is app for the envelope budget system, called Goodbudget. But, if you have extra then it carries over to the next month. When you are out of money in the respective envelope then that’s it for the month – no more spending. Whenever you go grocery shopping take that envelope and use only that money. For example, if you decide your grocery budget is $500 and your entertainment budget is $400 have an envelope for each and put the money in it. When you make different categories, put the budgeted amount of money in that envelope. The envelope system is fairly simple and is great for people who like to use cash. If you are currently living paycheck to paycheck having a strong budget will help transition out of that state. Having a good budget will help you understand how much in debt you are or how close you are to being in debt. Budgeting helps you avoid debt, improve credit and reach financial goals.Nut, the budget can still help forecast what major purchases will do to your bottom line
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Should you buy that flat screen TV or should you put that money aside for an emergency fund? Maybe you’re emergency fund is already in place. Once you have a good budget in place, making decisions should be easier.
When you do your budget if you realize you are spending $400 a month on eating out and $300 on groceries. Your budget should be a financial road map that guides you to your destination. To gaining control of your finance and spend according to priorities.As long as you budget correctly and start saving (and/or investing) in the right things budgeting will lead you to financial success. Instead of thinking of a budget as a burden or hindering your freedom, think of a budget as a way to achieve success. Once you change your mindset you might find yourself a little addicted to planning and budgeting. But, it’s also important to keep track of expenses and know where your money is going.
Either way, it’s best to have a plan to accomplish your goals. People normally use budget systems when saving for a large purchase or just trying to pay down debt. Making budgets aren’t easy or fun, at least not at first, – you need one of the budgeting methods to guide you.
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