Four steps to budget like a pro
Budgeting is a vital component of building and maintaining financial stability. For a lot of people though, it can seem like a chore — one too daunting even to try.
But it doesn’t have to be complicated, and the benefits of creating a budget are worth the added effort. Whatever your financial situation, understanding how to create and use a budget will help you manage your money more effectively and get you closer to achieving your financial goals.
Here are four things you can do to budget like a pro.
- Calculate your monthly after-tax income.
Add up all your sources of income, including your paycheck and any money received from social security, side gigs, child support, alimony, investment income and so on. This will give you a clear understanding of your financial parameters.
- List your expenses.
Figure out how much money you spend each month on bills and other things. It’s helpful to sort expenses into two categories: needs and wants. Needs include things like food, utilities, housing, transportation and other essentials you need in order to work. Typical wants include things you can live without, such as entertainment, presents, dining at restaurants and travel. Every dime should be accounted for.
- Abide by the 50/30/20 rule.
The 50/30/20 rule is a popular budgeting strategy. In it, you spend 50 percent of your income on needs, no more than 30 percent on wants, and at least 20 percent on savings and debt repayment. If your needs exceed 50 percent of your income, you will need to use the wants portion of your budget.
- Track your progress.
Stay on top of your budget by recording all of your expenses and income. Of course, your income and expenses will change, so adjust accordingly — but always have a budget.
Paulo Oliveira is assistant vice president, Cumberland County and Capital Region retail market manager at F&M Trust
Join our e-newsletter
Sign up for our e-newsletter to get new content each month.