Sarah Toffoli: Having a solid budget in place can help provide you with peace of mind and help you carefully manage your short and long-term financial goals.
Five important considerations in building a budget are: First, pay your monthly bills. There are often penalties if you pay late. Second, set aside the money you will need for weekly and day-to-day expenses, like groceries and transportation. Third, put money into savings. Try to build at least two months of take home pay for an unexpected financial emergency. Fourth, set aside money for larger expenses you know are coming, such as a new car or a new appliance. And fifth, set aside money for your major goals, whether it's a home, college for you or your children, or travel.
Now though you have learned some of the key considerations let's get into some detail and develop a budget. How much of your income should each expense take? Here are some guidelines to review. Your rent or mortgage should equal between 20-35% of your monthly take home pay. Food should equal about 15-30%. Transportation, including your car payment, gas, insurance, repairs, or bus fare, is a big variable, and should come between 6-30%.
Try to limit your installment debts, such as car loans and credit card bills to 10-20% of your monthly budget. And last, but not least, you should save or pay yourself between 10-15%. And to help yourself prioritize your miscellaneous spending, it's good to decide upfront whether a purchase is necessary. Always ask yourself these questions. Do I really need this today? Can I meet this need less expensively?
Finally, as a way to measure your budgeting success always review your bank and credit card statements, it will help you realize how you are actually spending your income.