Create a Budget

So how do you determine how much of your income should you put into a savings account?  Start with creating a budget. Why? Creating a budget is like making a map to help you reach your savings destination and achieving your goals.  You will see how much you need to live and what is leftover. There is a basic, simple savings formula.  Have you heard of the 50/30/20 rule?

For now, let’s do a quick budgeting overview.

50/30/20 Budget Plan

Percentages are based on net income (after all taxes and payroll deductions)

50% Basic Essential Needs 

• Housing
• Utilities
• Food
• Transportation

30% Your Wants

These are items you could potentially live without.  It may not be the easiest decision to live without some of these items, but they are not detrimental to your survival.
• Entertainment
• Hobbies
• Pets
• Devices (e.g.computers, cell phone)

20% Savings

• 10% for an emergency fund
• 10% for the future

Sample Budget (Based on $2,700 Monthly Net Income)

Wants, Needs and Savings

MONTHLY BUDGET

% OF TOTAL

Home
$825
31%
Utilities
$150
6%
Food
$325
12%
Transportation (bus pass)
$50
1%
Health Insurance (state assistance)
$0
0%
GRAND TOTAL OF NEEDS
$1,350
50%
Cell phone
$100
4%
Internet
$100
4%
Dining out
$150
5%
Cable/ streaming service
$150
5%
Entertainment
$100
4%
Clothes, haircuts, and incidentals
$150
6%
Miscellaneous
$60
2%
GRAND TOTAL OF WANTS
$810
30%
Savings – Emergencies
$270
10%
Savings – For the future
$270
10%
GRAND TOTAL OF SAVINGS
$540
20%

Working With Your Budget

Your budget is a living document that you review weekly to make sure you are on target.  At the end of each month, do a final review and ask yourself these questions:
Did I stay on target?
Do I need to make any adjustments for the next month?