Your budget is intended to make your life easier, not harder. Focus on creating a budget that works for you, not the other way around. For example, you might find that the 50/30/20 rule offers you a simple and ideal budgeting solution – 50% of your income goes toward necessities; like rent and food; 30% of your income can be spent on things you want, and the remaining 20% of your income goes straight into savings or paying off debt.
Separating your needs from your wants can be a challenge, but it’s important to be honest with yourself here. For example, you might need a car to get to work, but that new sports car is what you want. It’s okay to spend on items you want from time to time – just make sure it’s within your budget.
Even if you go with the 50/30/20 budget, you may want to refine your budget even more so that it works specifically for you. The best way to do this is by creating goals and focusing your attention on what’s most important to you. Using your savings to pay down debt should be your first priority; building emergency savings second; and starting to invest third.
An easy trick for making sure you don’t accidentally dip into your savings is to keep separate bank accounts for different purposes. What might that look like? You could consider a separate bank account for your necessities, another for your wants, and a third for your savings. Some digital banking apps even allow you to create multiple savings accounts within your banking app. This way, you can separate your savings into buckets and use them when needed.
Technology can be one of your best friends when it comes to budgeting. By using online and mobile banking, you can easily see your entire financial picture at any time and have the real-time control you need to maintain your budget. One of the most useful tech tools for your budget will be automating your savings, which can put your budget on autopilot, save you time, keep you accountable, and send the decided amounts to the right savings account.
Budgeting isn’t something that has a one-size-fits-all approach. Life is full of twists and turns and your budget may need to change if your needs change. Though it’s great to commit to following your budget closely, you shouldn’t be afraid to change if something about your budget really isn’t working for you. Remember, your budget only benefits you, so while you can make adjustments as needed, you should try and avoid any unnecessary changes to your budgeted savings.
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