Making Your Own Budget
A budget is a plan for your money: where it needs to go, how much, and when. Some of your money will need to go towards the basics, such as rent and food, and some might go to insurance, debt you might have to pay back, charitable donations, and entertainment. A budget is key towards saving well. Below are some steps you may like to take to make your own budget.
Step #1: Decide between needs and wants
"Needs" are necessities in life whereas "wants" are expenses that are not completely required. It is important to distinguish between these two terms when budgeting, as you always have to account for your needs, and may choose to cut down on your wants when saving up for something.
Needs
The following is a set of basic needs. The list does not include things such as clothing or transportation as those things are dependent on the situation. What is an absolute "need" for one person may be a "want" for another.
Wants
The following is a set of basic wants. This list too does not include everything, as it is dependent on the situation.
Step #2: Decide the best steps to cut back on your monthly budget
The next step is to determine how to cut down on your monthly expenses. Below are a couple of alternatives to cut down on excessive spending.
Step #1: Decide between needs and wants
"Needs" are necessities in life whereas "wants" are expenses that are not completely required. It is important to distinguish between these two terms when budgeting, as you always have to account for your needs, and may choose to cut down on your wants when saving up for something.
Needs
The following is a set of basic needs. The list does not include things such as clothing or transportation as those things are dependent on the situation. What is an absolute "need" for one person may be a "want" for another.
- Housing
- Insurance
- Savings
- Utilities
Wants
The following is a set of basic wants. This list too does not include everything, as it is dependent on the situation.
- Entertainment
- Eating Out
- Giving Gifts
- Charitable Donations
Step #2: Decide the best steps to cut back on your monthly budget
The next step is to determine how to cut down on your monthly expenses. Below are a couple of alternatives to cut down on excessive spending.
- Eat at home instead of going out
- Cancel your movie channels
- Get together with friends at home instead of going out
Budgeting Practices
- Start Saving: Set aside some of the money from your paycheck every month. It's a good idea to put aside 10% of your paychecks for emergency funds. This way, you'll have savings to turn to in the case of an unexpected event, or in the case of college tuition.
- Don't Spend Money You Don't Have: Only buy items with the money you have! It's not good to go into debt. Do not fall to the temptations of a credit card.
- Save Early, Save Often: The earlier you start saving, the more money there is later on. The longer you let your money remain in a savings account, the more interest you'll earn.