Do you have a budget?
Basic Budget Allocations:
Here is a list of what the various expense categories should be to have a balanced budget, after paying taxes:
If you have School or Childcare expenses, these should total no more than 5% and this would require adjustments in other categories to make sure the total still equals 100%. Also, another signal of budget health is the total of Housing, Food and Auto expenditures. The sum of these three categories should not exceed 70%.
Needs and Wants: We all have needs. We all have wants. They are not the same! Our values influence what we consider to be a need and what we consider to be a want. Is a vacation a need or a want? What about a second car or a college education for your kids? As you look at how you spend your money, consider whether you are spending on needs or wants and why you buy what you buy.
Setting Goals: To budget effectively, you need to be able to set goals and achieve them. A good acronym for goals is SMART, which stands for:
Specific: Needs to be specific enough to suggest and encourage action. (Save money for a new lawn mower.)
Measurable: So you can know when you have met your goal or how close you are. (It can’t be “I’d like to have more money” because you can’t measure “more” or know when you are successful in achieving the goal.)
Attainable: The steps toward reaching your goal must be reasonable and reachable. (I can save $10 each week and will reach my goal in 6 months.)
Relevant: Needs to make sense and relate to a need you have. (“I need to save money to buy 4 stoves” is not relevant or motivating.)
Time-Related: Needs to have a specific target completion date. (I know my car will need a new transmission in the next year so I’ll save to have enough in 9 months.)
Keeping track of your expenses, knowing the generalities of where your expenses should be, and setting goals for your budget will all help you then set a plan and take action that will move you toward having a balanced budget.