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Your Complete Guide to Creating a Monthly Budget in 2020

How to Create a Good Budget

The principles that make a good budget, something you can stick to:

  • Being Realistic: Being too strict is a recipe for failure.
  • Making Adjustments: A budget is not set in stone, but a fluid thing.
  • A Team Sport: If you live with a partner or spouse, you have to agree mutually on how to budget the financials.
  • Expect the Unexpected: Keep an emergency fund, ideally 3-6 months of necessary expenses.
  • Budgeting the Expected: Certain upcoming expenses need to be budgeted in advance, like property tax, holiday shopping, etc.

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IDEA EXTRACTED FROM:

Your Complete Guide to Creating a Monthly Budget in 2020

Your Complete Guide to Creating a Monthly Budget in 2020

https://www.listenmoneymatters.com/monthly-budget/

listenmoneymatters.com

5

Key Ideas

A Monthly Budget For Your Money

No matter how little or how much money you earn, creating a monthly budget is one of the most important aspects of managing your finances. What gets measured gets managed.

Having a budget doesn't stop you from spending money the way you want it to, but works like a partner to track your spending and allocating resources to help you reach your financial goals.

The Envelope System

The Envelope system is a way to track your variable expenses like food, entertainment, and drinks.

This method, preferably used weekly, allocates a certain amount in each category in labeled envelopes (food, drinks, movies, etc.). Once the envelope is empty, you are done spending in that category.

How to Create a Good Budget

The principles that make a good budget, something you can stick to:

  • Being Realistic: Being too strict is a recipe for failure.
  • Making Adjustments: A budget is not set in stone, but a fluid thing.
  • A Team Sport: If you live with a partner or spouse, you have to agree mutually on how to budget the financials.
  • Expect the Unexpected: Keep an emergency fund, ideally 3-6 months of necessary expenses.
  • Budgeting the Expected: Certain upcoming expenses need to be budgeted in advance, like property tax, holiday shopping, etc.

Start Budgeting

Follow these simple steps and start Budgeting:

  • Choose the right tool (Budgeting App, Excel sheet or Envelopes)
  • Gather all information like your bank and investment account numbers, user id's, and passwords.
  • Make a list of all your income sources and all your expenses.
  • Share the important financial and budgeting details with your partner or spouse if applicable.

The 50/30/20 Rule

It breaks down your budget categories into three broad segments:

  • 50%: Essential Expenses like housing, automobile expenses, groceries, insurance, utilities, etc.
  • 30%: Discretionary Expenses (Non-essential) like Dining out, entertainment, drinks, etc.
  • 20%: Financial Goals including mortgage, home, and educational savings.

If there is heavy credit-card debt, the financial goals should be 30% and non-essential spendings only 20%.