f you don’t have a budget, you probably know you need one—or remember you need one when you stress over bills. Try one of these budgeting techniques to find the one that works for you.
Pick a Budget, Any Budget
Fixed vs. Flex
First, gather six to 12 months’ worth of bank statements, receipts and other financial records. Divide your expenses into two groups:
1. Fixed, monthly essentials, like food and mortgage.
2. Flexible, monthly non-essentials, like eating out and magazine subscriptions.
(A little division can help turn quarterly car insurance bills, semi-annual life insurance payments and other periodic expenses into monthly amounts.)
Now add up your fixed expenses and subtract the total from your monthly income. What’s left over is your flex spending money. How does it compare with what you actually spent on non-essentials? Are you comfortable setting these amounts for fixed and flexible expenses going forward? If you are, you’ve got a budget. If you aren’t, look at your expenses to see where you can cut costs and redirect money to where it better suits your needs.
50/30/20
In a perfect world…
No more than 50% of your monthly income would go to must-haves, such as housing and utilities—expenses you have to pay every month
No more than 30% would go to wants, such as entertainment and gym memberships
At least 20% would go to savings and paying down debt
Limit your spending and saving to these percentages. And be careful about confusing “wants” for “must-haves.” Premium cable TV, for example, may be nice to have but it is not a necessity.