Budgeting
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Imagine waking up to several missed calls from creditors asking you to contact them about your overdue balances.
On top of that you don’t have enough money to pay your necessary bills each month. There is a solution. Personal debt is one of the biggest issues Americans are currently facing. Only a handful of people take budgeting into consideration and take it seriously. 32% of Americans prepare a budget each year. Only 30% of those people have a long term financial plan. Why aren’t all Americans budgeting?
What is the root of personal debt? Is it being inexperienced? Is it lack of planning or saving? It very well could be a combination of these things and more. Someone might say budgeting has nothing to do with all the accumulated personal debt. They would say that even people who do budget have unexpected expenses such as a flat tire or an exaggerated medical bill for an emergency surgery. An opposing party would also argue that a non-budgeter does not make a set amount each month and cannot account for it. For example, you work part time and some months you bring home over 500 dollars and just recently you only brought home 350 dollars. This means you have an unstable income and predicting how much you can afford in bills each month would be difficult. However, these challenges can be overcome by budgeting, planning, and saving.
Budgeting is like being on your death bed and the doctors suddenly bring in the new vaccine that cures all sickness; it will be your lifesaver. Also, there is a savings part of your budget that can go to the unexpected and if you need to take out loans for something unexpected that can be thrown into the debt repayment category and with some adjustments; everything can be taken care of.
Putting together a budget just sounds stressful. What do you even include? How much should you put toward each item? It’s easier to plan than you think. A budget should include everything from house payments to clothing and entertainment expenses. Notice how not only essentials are included in the budget; entertainment and miscellaneous expenses are also accounted for.
Depending on your monthly income, you could choose not to include these items, as to save even further. To get an idea of how much each item should be worth in your budget, these are the suggested percentages:
30% housing
15% food
10% utilities (which includes things like water, electric, cable, phone, etc.)
10% transportation,
10% debt repayment,
10% savings,
5% clothing,
5% entertainment,
5% miscellaneous expense.
Obviously, all of these are important, but some are less important. If you really can’t stick to your budget, entertainment or clothing should be cut down.
You should think about having an emergency fund. It should be enough to live comfotable for six months. You should also consider compromises.