Having a budget is one thing. Having a balanced budget is quite another. The goal of following a budget is for each of your financial responsibilities to be met without one superseding another. Every debt is important and while some may be higher on the totem pole, it doesn't mean you should ignore the others. A budget can allow you to live life the way it was meant to be lived - free from worry, stress and debt! The hardest part of setting up a budget for most people is learning how to budget for balance.
Bringing Balance to Your BudgetMany of today's top financial experts believe that following a balanced budget will help even the consumer living week to week to attain financial freedom from debt. The paycheck to paycheck consumer is most likely to be the one who will never even attempt to set up a budget because their life seems so unpredictable and out of control. But through a balanced budget, even this type of consumer can get ahead of their debt and live a less stressful life. The ideal budget breakdown goes like this:- 60 percent of your monthly income is used for monthly expenses such as mortgage or rent, transportation, utilities, insurance and food. Basically all of the essential things you need every month just to live.
- 10 percent should be dedicated toward paying off outstanding debt from credit cards or personal loans. If you're lucky enough to not have any of these types of debt, then this allotment should be placed in a long-term savings plan like stocks or bonds..
- 10 percent should be placed in a short-term savings account as an emergency fund. This is the money you will draw from should an emergency occur, such as an appliance needing replaced or your car needing repaired.
- 10 percent should be placed toward your retirement. Many people already have some money being put in their retirement fund if they have a 401(k) through their employer. However, their contribution is usually never more than 5 or 6 percent. By increasing your retirement fund to 10 percent, your money will grow at a faster rate which you will appreciate when you hit 65 years of age. If you don't have a 401(k) through your employer, look into opening up an IRA.
- 10 percent should be paid to possibly the most important creditor you have - you! This is the money you will use for entertainment purposes, hobbies or whatever else you want to use it on. Since all of your obligations are being met using this simple balanced budget, you can spend the money without the guilt associated with taking the funds from the gas bill.
Balanced Budget = Balanced LifeBy following a balanced budget, your life will feel more fruitful and purposeful. You won't be making excuses as to why you can't pay the phone bill this month and your stress level will be significantly lowered. Keep in mind, you may have to change your spending habits in order to reach the goals of this budget and if you can't attain this goal right off the bat, don't get discouraged. It can take a few months before a budget settles down into a manageable partner in your life. Simply follow the balanced budget as best you can and strive to make it work as well for you as possible. It won't be long until you begin noticing the fruits of your labor. Check out our collection of budget calculators to make budget organization much easier.
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