If you feel like you have a good grasp of making ends meet throughout the month, you may think you don’t need a budget to handle your finances. But while you may have the appearance of having your finances in order, you might actually be more behind than you think!
Stay Ahead of Your Finances
Most Americans have less than $5,000 in their savings accounts, which is only 16% of the recommended $30,000 that should be in your savings. While having savings may not seem like a necessity, having a financial safety net is one of the most important steps to take when it comes to your finances.
The amount you should have tucked away will depend on your financial situation. Here are a few reasons you should put aside some funds:
- Regular Bills and Fixed Expenses
- Discretionary Spending
- A Savings Fund
The 50/30/20 Budget Rule
When it comes to budgeting, the 50/30/20 rule is one of the most common budget plans.
- 50% for Fixed Expenses: Necessary expenses are generally where 50% of your budget will be designated. Your bills and debts should be highly prioritized. For example, payments on title loans or mortgage are necessities to budget for, but a cable bill may not be. Where you can, cut down costs of unnecessary bills.
- 30% for Discretionary Expenses: This is the most flexible part of your budget, as 30% of your budget is meant for wants instead of needs. What you might consider is how you would like to designate your money, as you could go out to eat or buy a week’s worth of groceries. However, if you decide to spend this designated amount, be smart about where your money goes!
- 20% for Your Financial Goals and Savings: If you are not using your budget to save for the future, you are doing yourself a disservice. 20% of your income should be designated to go into a savings fund, a retirement fund, or an emergency fund. Emergency funds can be essential, as they give you the safety net that you need when a financial emergency happens, or you find yourself unemployed for a period of time.
Budgeting for Your Goals
In addition to keeping your finances managed and secure, a budget can help you reach financial goals you might not have been able to reach otherwise. Financial goals differ from person to person, and you should tailor your budget to support the goals you deem important.
Some financial goals that are common are:
- Saving for Retirement
- Getting Out of Debt
- Paying Off Student Loans
- Saving for a House
- Saving for a Wedding
- Creating an Emergency Fund
Whatever your goals may be, a budget can be what helps you take back control of your finances. Budget plans give people the tools they need to achieve financial milestones. Whatever your ideal budget may be, learning to budget can help you quickly and efficiently manage your finances and save for expenses. Create your budget and stick to it!