This is the time of the year when many people begin to contemplate how they can do a better job with their money. More people focus on planning a budget in the month of January than they do in any other month of the year. They begin to analyze what they spend their money on and how much money they brought in. More importantly, they come up with ideas and plans on how to budget more effectively throughout this next year.
There are some key things to focus on when you are trying to do a better job budgeting your money. These factors include the following.
Fixed Costs – mortgage payments, rent, car payments, transportation, utilities, subscriptions
Financial Goals – retirement fund, paying off debt, emergency fund, savings account
Flexible Spending – eating out, groceries, shopping, entertainment, gas
The 50-20-30 Rule
For the most part, all of our money goes to one of these 3 categories. How much should go to each category is largely up to each individual. Experts suggest that people should try to follow the 50-20-30 rule when it comes to spreading your income between these 3 areas. 50% should go to fixed costs, 20% toward financial goals, and 30% to the flexible spending category.
This is not always going to work out perfectly for each person. For example, say you are a student who is fresh out of college and trying to pay off your student debt as quickly as possible. You may find that your financial goals category gets more than just 20% each month. On the other hand, you may be the head of a home of 5. You may find that you need more than 50% of your income to cover fixed costs. The idea is to stay as close as possible to the 50-20-30 rule.
The idea behind this budgeting concept is that it helps you manage your money effectively while focusing on the most important areas of your life. It can also help you realize whether your income is enough to afford the lifestyle you lead. Looking closer at your fixed costs may help you to determine costs that could be eliminated.
Want More Ways To Budget Money?
Over the years, there have been many different suggestions and ideas shared to help people plan a proper budget for themselves. There may be one that has already worked well for you in the past that you want to continue to use. At the end of the day, having a plan in place will make a significant difference as you budget throughout the year.
If you have been unsuccessful budgeting in the past, feel free to give Hacker Accounting a call for help. We have been helping people with their finances for years and are happy to share ideas with you. Call us today to make sure 2015 turns out the way you want it to, 602-375-5251.