Creating a Classic Budget
A budget is the foundation of a healthy financial plan, and seeing the numbers in black and white can provide valuable insight into how you’re using your money and where you can allocate it for better use.
A budget can help you see areas where you’re spending more than you realize. It can also be adjusted to allow for occasional entertainment and unexpected emergencies. You have many reasons to dedicate a few hours to creating your own classic budget, especially since you can do it in almost four easy steps.
Adopting the 50-20-30 Approach
If you don’t want to create a classic budget, you have some alternatives. For example, you might consider organizing your plan according to the 50-20-30 rule. According to this approach, you spend:
- 50% of your after-tax income on housing, food, and other necessities
- 20% on debt repayment or increasing savings
- 30% on discretionary expenses
While this plan is straightforward, some critics argue that it allows for too much discretionary spending and does not adequately emphasize debt reduction or saving.
Using Apps
Another option instead of a classic budget is to use a budgeting app that can be downloaded to your smartphone, tablet, or computer. Typically, the app connects to your bank accounts and credit cards, tracking your spending and creating a monthly report categorized by spending categories.
Budgeting apps can usually be set to alert you when a payment is due, when your account balance is too low, or if there’s suspicious activity in your account. Most apps range in cost from free to a few dollars per month, although some offer free trial periods so you can test them out before purchasing.
Putting Your Budget to Work
Once you discover how much money you’re spending and where you’re in a better position, take the necessary steps to prioritize your financial future.
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How to Achieve Financial Stability with Reduced Income?
Budgeting principles apply at many income levels regardless of your specific income level. However, you may face challenges securing all necessities on a limited income. As usual, you should start by reviewing all your expenses and comparing them to your income. Then you can start making decisions on how to cut back on spending. If you’re still struggling to make the budget work, you may want to explore additional ways to increase your income. Finally, if you’re having difficulties covering bill payments, you may consider exploring rent assistance options or debt counseling.
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Source: https://www.thebalancemoney.com/how-to-budget-and-save-money-in-5-easy-steps-4056838
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