How to Budget Properly
Budgeting is an extremely important skill to have in life. Whether you are saving up for a new car or a new toaster, you need to have a plan on how to pay for it. Having a budget allows you to get your proverbial ducks in a row and be more financially responsible. So how should you go about setting up a budget?
First, you should calculate your monthly income. Try to estimate an accurate number that includes your regular salary plus any additional sources of income you may have. This is important, as it will allow you to determine how much money you can spend each month.
Next, you should subtract your monthly expenses. This should just include things that are necessary for you to pay for every month, like shelter and food. You should also prepare for unexpected expenses by adding about 10% to your expenses budget (for example, if your expenses are $3000 a month, add in an extra $300).
After subtracting your expenses from your income, you hopefully have an accurate picture of what your budget looks like. The number that you get represents money that you are free to do with as you please. Saving at least part of this money is very important and will have a big impact later in life. A good rule of thumb is, when buying something that you want, to save the same amount of money as the item costs. For instance, if you want a $200 golf club, you should save an additional $200 and put it in the bank. This may not be sustainable for your entire life, but it will allow you to put away some money that you otherwise would not have.
With the rest of your budget, you should try to save money or use it to pay off debt. It will improve your financial stability and give you some space to make large purchases in the future. Make sure to follow your budget every month because if you slack off, you could end up in a dire financial situation. Budgeting is crucial and can greatly help you to plan out where your money goes.