In an alternate universe where you are Tony Stark (Iron man), you will be able to spend as much money as you want and your bills will be magically taken care of. Coming back to reality, we realize that to live a life like that, you will need access to limitless funds or you'll set yourself up on a fast track to going broke.
A simple way to get a hang of making budgets is the 50-30-20 budgeting principle that caters to your needs, wants and savings.
Budget 50% for your needs
Half of your income should be budgeted for your “necessary expenses”.
What are the necessary expenses? Typically these include feeding, rent or mortgage, a car loan or lease payment, insurance (auto, health, life, etc.), and monthly costs like utilities or electricity.
Your “needs” or necessary expenses are often the largest monthly expenses you incur and you should budget 50% of your income for these expenses.
Budget 30% for your wants
This includes non-essential expenses such as treating yourself to a large box of pizza, buying yourself a nice outfit, exploring a new restaurant, internet subscription, travel or leisure expenses, or a gym membership.
According to the 50-30-20 budgeting rule, these expenses should add up to no more than 30% of your total budget.
Budget 20% for your savings
So far, you have budgeted for your needs and wants. Now, it’s time to think long term.
20% of your income should be channeled to saving and investing for both short and long-term goals.
Everyone is advised to create an emergency fund with up to six months’ worth of expenses. This is so that you don’t get stuck when your car breaks down and you need to fix it or if you have to cover an unexpected medical cost.
Again, budgeting is incredibly important and practicing the 50-30-20 approach is one way to make it a habit.
Need help with saving the 20%? Pennysmart has a special savings plan that helps you save the 20% with up to 15% annual interest and zero-hassle.
Visit https://pennysmartapp.com to learn more on how to create your own personal susu box.