We've helped over Over 3 Million Borrowers Successfully Manage Their Debt!
add_action( 'wp_footer', function() { ?>

Create a Budget

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%

Flexibility

Having a FLEXIBLE budget gives you the ability to adapt and handle life’s changes or surprises. Life happens. We get sick and miss work. Air conditioners break, and leaky roofs need repairs. Cell phones fall into toilets. We get flat tires. Companies close, and we lose jobs. We get pregnant and not always at a planned time. Dealing with unexpected situations like these requires budget adjustments.
Money is your friend when you manage it well by planning for the unknown and unexpected.  When the unexpected happens, you don’t just suddenly have more cash to fix the problems. The real test of financial stability is to figure out how to do what you need to do with what you already have. Without flexibility in your budget, if one thing goes wrong, you may never catch up!

Why the Savings Component in Budgets Is Critical

Your budgeting components for savings are critical—even though the savings percentage of the pie is smaller. Savings is your insurance that keeps other parts of your budget from imploding.
How much do you need in savings?
No one-size-fits-all answer exists because it depends on many variables. As an example, many financial advisers recommend that you have 3- to 6-months of income in your savings account. So, if you bring home $1,500 per month, that means you want $4,500 to $9,000 in savings.

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?