Outline of a Personal Budget
A personal budget can help you reach financial goals. It will prevent you from accumulating debt, and it allows you to determine when and how to spend your money. Each budget will be different, since it should match your personal priorities and situation. However, each budget should include basic categories, such as housing and debt, savings, basic needs and fun money. Your budget should reduce your stress over your money.
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Housing and Debt
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Your housing payment should be set from month to month. If you rent, it may increase annually. Your other debt payments, including your car payment, student loans and credit-card payments, also fall into this category. These are often set payments, and you have little control over them after you take them out. However, the total of all these payments should not be more than 30 percent of your income. This will give you enough money to live on, with enough to add to savings and investing.
Savings and Investing
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To retire comfortably, contribute 15 percent of your income to retirement each month. You may also want to save an additional 10 percent to use for emergency funds, to build wealth or to save for home repairs. The additional savings can be invested in mutual funds or in real estate. Having money saved will make it easier to cope with a job loss or other unexpected events in the future. The remaining amount of your income can be used for other expenses.
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Necessities
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The remainder of your budget is divided into two different types of expenses. Necessities should include groceries, electricity, heat and transportation costs. Include money for medical expenses in this portion of your budget. If you need to reduce costs in your budget, trim luxuries and then cut back on the necessities. If you have a low income, a larger portion of your budget may be spent on housing and food, which means that you will have less money for luxuries.
Luxuries
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Luxuries are items in your budget that may improve your quality of life, but are not necessary for survival. Examples include eating out, gym memberships and satellite television. If you can afford these items, include them in your budget; but if you are having a difficult time balancing your budget, cut back. It is important to have some extra money or luxury items in your budget each month, because they help you to stop overspending in other areas. Shop for deals or lower the cost of these items by looking for better plans.
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References
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