With the new restrictions, our wallets are feeling the pinch due to the economic deterioration. We need to learn how to budget, now more than ever. Therefore, What is budgeting? budgeting is simply telling Your money where to go instead of wondering where it went. This includes those few notes or coins that you give away.
How to apportion money
Have you ever heard of the 50/30/20 rule? If no, this rule states that 50% of your income should go to basic needs. That is food, rent, paying utility bills, transportation.
30% should go into wants. Wants may vary but basically, they aren’t necessities. Wants may include the need to get your hair and nails done, entertainment and many others.
20% should go to savings, investment, and tithes.
The 50/30/20 rule may, however, vary when it comes to different individuals. Some people use 70/30, in other words, 70% goes to needs and 30% into savings.
How to set up a zero-based budget.
A zero-based budget is whereby total income minus total expenses equals to zero.
For this part, you might need to get a pen and paper.
- First, list down all the money coming in(income). If you are a student this might include; money from your parents or guardians, money from your side hustle and so on. If you are not a student then your income source would be from; your net salary, tax refund and so on. This part should be easy. However, remember to write down the sum total of your income.
- Then list down all the money going out. (expenses)
Categorize them into fixed expenses and variable expenses. This step is however optional. Fixed expenses are those expenses that are not likely to change from month to month. These expenses include rent, insurance, utilities, paying off debts and memberships.
Variable expenses, however, are more likely to change from month to month. They include food, gas, transportation, clothes, entertainment or fun and personal expenses. Remember to write down the sum total at the end of each category.
With all that said, go and make a budget, today. And remember it might not be as smooth as you’d expect it to be the first time. Don’t give up. Try and try again to stick to your budget. As Dave Ramsey says ” baby steps.”