Cutting through the confusion
Despite the importance of a budget, more than half of Americans don’t have one, and 22% say they don’t have a clear picture of what they spend on housing, food and entertainment.
What is most surprising is 78% of Americans reported they do know what they are spending their money on, despite half don’t have budgets. Since do not have a budget, their financial picture is at best cloudy. Worse case scenario one might find themselves overspending, racking up credit card debt and feeling confused and anxious about your situation. A good budget gives the confidence and a blueprint to live the life wanted.
To clear the confusion a budget is a monthly financial plan that divides income into categories. It uses that monthly income as a cap on the spending and then determines how can be allocated to savings goals and expenses within that limit. It is the most crucial element of your personal finances, the key to living within ones means and building individual wealth.
A budget must be part of any adult’s life plan. And it can and will change as a person matures and their wants, needs and goals shift.
Budgets are also important because they provide a convenient framework in which to conduct self-talk. Saying “Can I afford this or can’t I?”
Another benefit of a budget is that it helps prioritize spending. The Budget Investigate staff recommends a budget follow the 50/20/30 rule. Once income is identified, this rule recommends that your money goes out in this order:
50% of your budget should go to the essential expenses. These are expenses which always have to pay as a minimum to keep life going, such as housing, transportation, groceries and utilities.
20% should go to the financial priorities. These are expenses help accomplish important financial tasks. Examples, include; paying off loans, building savings, saving for retirement and more; they generally include savings, debt repayment and financial contributions.
30% are assigned to lifestyle choices. Basically, this is what is leftover. This is what is spent on expenses such as dining out, shopping and other fun spending.
A free Budget Investigator report will review spending habits and develop a budget framework to remove the confusion.