If you recently received your first paycheck or if you have been working for a while, you will learn how to manage your money can be one of the best decisions you make. Budgeting can be complicated, especially when you start thinking of things like saving for a home payment, retiring money and paying for insurance. Taking the time to create a budget is a great way to get started.
Here are some tips to help you create your first budget and make financial decisions to help you stay on track.
first Review Your Current Expenditure
Start by reviewing your latest bank and credit card statements to evaluate your monthly expenses and earnings. It can be helpful to track everything you spend money on every day so you can find out where you can cut costs, says Consumer Financial Protection Bureau. For example, you might not think that $ 3 latte costs a lot, but $ 3 per day for 365 days adds more than $ 1
2nd Consider using a 50-20-30 budget
When creating your first budget, Forbes suggests using 50-20-30 Rule, which is a three-category budget. First, appoint 50 percent of your income to the necessary expenses, such as rent, tools and bills. Then allocate 20 percent of your income for financial goals, such as saving, paying off debt and investing. The remaining 30 percent can be used for discretionary expenses, such as dining, holidays and other unused expenses.
Remember that these percentages are the maximum that you should spend in each category, Forbes says. If you can stay under the budget, you can get more money to put in your goals. Also keep in mind that the budget of 50-20-30 is just a plan. You can adjust it to suit your specific needs or follow another plan that works for you.
3rd Focus on saving
Save money for a rainy day and in the long run are important parts of successful budgeting. It is a good idea to have an emergency fund to handle life's unexpected expenses, such as car repairs or medical bills. The balance recommends that you have saved three to six months' costs.
Although the pension may be decades away, it is a good idea to start saving as early as possible. The contract newspaper recommends that you start in the 20th century by saving between 10 and 15 percent of your income in a pension account. (You can then work to put 20 percent in your pension fund.) DaveRamsey.com says investing through your retirement plan at work can be an easy way to start spending money, especially if your employer makes matching contributions. You can even get these contributions automatically from your paycheck.
4th Paying Your Debt
If it is credit card debt or college loan, interest on the money you owe can accumulate quickly and add to your debt. Paying off your debt should be one of your first priorities. Lowering and eventually eliminating your debt can help increase your financial security, improve your credit score and hopefully reduce some stress in your life, Balans says.
5th Use online tools and apps
From web banking to budgeting apps, there are many tools that can help manage your finances more easily. Forbes notes that some of these programs can connect to your bank accounts and provide updates and warnings about your expenses.
Setting up and keeping a budget doesn't have to be overwhelming.
Originally published on September 2, 2010.