Happy New Year! For many people, the new year is all about making good on those promises you made the previous year to improve yourself and your lifestyle.
Budgeting for the new year is a great way to start (we know it’s boring, but hear us out on this one!). Getting disciplined about budgeting leads to a healthier bank balance, and a less stressed version of yourself. After all, who doesn’t get a little nervous after an overly-indulgent shopping trip, or an unexpected bill just before payday?
Before we bring on the finance tips, let’s break down the obvious...
What is budgeting and is it really that important?
Simply put, budgeting is when you create a plan on how to spend your money. The end goal is that you’ll know ahead of time if you can afford your grand plans for 2019. You’ll definitely see the benefits of budgeting when you’re hoping to purchase a convertible in time for summer, or book roundtrip flights to Europe.
How do I budget?
The good news is, you don’t need to know algebraic equations or a magic trick to predict the future here. One of the easiest (and most effective) methods of budgeting is to use the 50-20-30 rule to split up your income each month. Calculate your monthly income, and then split it into three categories of 50%, 20% and 30% for your monthly budgets. Here’s what it looks like:
Living expenses and essentials
50% on the things you need.
20% on the things you're saving for.
- saving account
- down payment
- rainy day fund