Smart Budgeting

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The 50/30/20 rule is one of the most talked-about strategies in personal finance - and for a good reason! It’s a straightforward yet powerful guideline to help you take charge of your money. Here’s how it works:

• 50% for Needs:
This piece of your income is for the essentials - food, rent, utility bills, and basic clothing. There is no way to cut these out since you need them to survive and stay comfortable.

• 30% for Wants:
This budget is for the things you enjoy but don’t necessarily need, like a new phone, dinner at a restaurant, or tickets to a concert.

• 20% for Savings:
This part is about securing your future. Use it to build an emergency fund, pay off debt or invest in something that grows your wealth over time.

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Steps to Create a Budget

• Calculate Your Income
Start by listing all the ways you earn money - this could include your job, side hustles, freelance work, or even allowances. Make sure to focus on your after-tax income (the money you actually keep for yourself) as your starting point.

• List Your Expenses
Divide your expenses into two clear categories:

 - Fixed Expenses: These are regular costs that stay the same each month, like rent, transportation, and utility bills.
 - Variable Expenses: These are more flexible and change each month, for example - groceries, entertainment, and dining out.

• Set Spending Limits
Decide how to allocate your money. You can follow the classic 50/30/20 rule or design a custom spending plan that matches your needs and lifestyle.

• Track Your Spending
Keep an eye on where your money is going. Use budgeting apps or even a simple spreadsheet to record your expenses and make sure you’re staying on track. If you prefer using a spreadsheet, there are lots of helpful templates that can be found online.

• Adjust as Needed
Take time each month to review how your budget is performing. If something isn’t working, change it to better fit your financial goals and habits.

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Why Budgeting Matters

Budgeting is an essential skill that can completely transform how you manage your money. Here’s why it’s so powerful:

• Track Spending:
Budgeting lets you see exactly how much you’re spending and where, which helps you see where you need to cut back.

• Achieve Goals:
Whatever it is you are saving for, budgeting helps you stay focused and disciplined in reaching your financial goals.

• Reduce Stress:
A good budget can save you some stress by giving you a clear path as to what to do with your money and how to spend them accordingly.

• Avoid Debt:
With a solid budget you’ll be less likely to fall into debt which in some cases can be detramental.

Common Budgeting Mistakes

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Avoiding these common budgeting mistakes can make a big difference in how well you manage your finances:

• Spending too much on useless things:
In today's world everyone is trying to get us to buy something. Whether it is cheap or expensive. Many giant companies these days have marketing tactics and strategies made to convince the consumer they need something when in fact - they don't. Don't fall into simple marketing tricks made solely to make someone else rich.

• Not Accounting for All Expenses:
Even those small, insignificant purchases - like a coffee or a snack - can add up quickly. Keep track of everything to stay in control.

• Overestimating Your Income:
Be honest about how much money you actually make. Overestimating can lead you to overspending which, as you probably know, isn't good.

• Failing to Save for Emergencies:
Life is unpredictable. Always set aside a portion of your income for unexpected expenses like car repairs or medical bills.

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