With food prices rising an average of 74% over the past couple years and gas and transportation costs soaring, it is ideal to create a personal budget and make sure to stick to it.
The Ideal Personal Budget
Creating a budget can be as tricky as sticking to one, and much thought needs to be put into it. The hardest part is often facing existing spending habits, rather than defining new ones! Experts suggest gathering past receipts and pay stubs to get an accurate picture of income to expenses. Tracking and categorizing daily expenses for a month or two also creates a financial picture. The ideal breakdown of spending is:
- Housing and Debt: 30%
- Taxes: 25%
- Insurance (Health, Car, Homeowners, etc): 4%
- Savings/Investment: 15%
- Living Expenses: 26%
Keys to Budget Success
The above breakdown is just a guideline and may need to be adjusted depending on financial goals. When creating a personal budget, remember these tips:
- Include accurate income
- Treat your savings account like you would a bill and make sure to always pay into it
- Include non-monthly expenditures
Staying motivated and avoiding impulse buys are also critical in maintaining a personal budget.
Personal Budget Pitfalls
- Avoid credit cards – pretending that credit cards exist outside a budget is a huge mistake that could end up costing a lot. If you’ve included a savings portion in your budget, then hopefully you can avoid having to use a credit card in an emergency, but this is not always possible. Just make sure to adjust your budget to include the monthly payments.
- Lack of Adjustments – A big pitfall when budgeting is failing to account for budget changes. Each time you get a raise, or your financial goals change, sit back down with the calculator and re-configure your budget. This will save you the major headache in the long run.
- Holidays – Many people forget to budget for the extra expenses surrounding the holidays. Be sure to include a portion of your budget dedicated to presents, time off, and other holiday expenditures.
Bottom Line
Keeping a goal in mind, whether it’s saving up for that new LCD Flatscreen Hi-Definition TV or simply trying to make ends meet, will be the biggest benefactor for budgeting success. If you slip away from the exact percentages of your budget, don’t fret. Just sit down and start anew.
Stephanie Cox - Stephanie earned a B.S. in General Science with minors in physics and professional writing from Portland State University. As a teenager, ...
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