In the face of the latest news coming out of the White House, many of us are looking for innovative ways to distract ourselves from recent headlines. On your quest to fill your time, you’ll eventually find yourself where you never thought you’d be: thinking over a household budget. The state of your personal finances ranks pretty low on your priorities, but once you’ve managed to catch up on the latest Netflix binge and clean the apartment, it may be all that stands between you and the political reality of the country.
A budget may not be your first idea of a good time, but it’s in no way a waste of one. It can help you identify reckless spending habits and reveal ways you can prepare for the future. If this is the first time you’ve ever tabled a budget, these objectives may seem out of reach, but rest assured you can cut down on frivolous spending and increase savings if you ask yourself the following questions as you go:
How Much Do I Make?
The very first building block of your budget is the amount you take home each paycheck. To make sure you’re starting your financial plan on the right foot, you must ensure you have an accurate sum of your net income. Net income is what you take home after taxes and any other deductions that come out of your paycheck. To use your gross income would falsely inflate your earnings. You’ll think you’re making more than you actually are, and it can lead to overspending.
How Much Do I Spend?
Accuracy is just as important when figuring how much you spend. Unfortunately, finding that exact sum may be more difficult than figuring out your net income. To get an accurate understanding of your expenses, you’ll have to go through your bank statements and comb over what you spent on things like rent or mortgage payments, groceries, insurance, utilities, and gas. You must also include any variable expense that you made over the last 6 months or so, so you can get an understanding of how you spend your money.
Am I Prepared For The Future?
Once you’ve got a tally of your fiscal comings and goings, you can see how much of your paycheck you’re retaining each month. Personal finance experts suggest you have roughly 20% of your income left over after you’ve paid for fixed and variable expenses. This portion of your wage should go towards a rainy day fund that can help you pay for unexpected expenses you didn’t budget for. Things like auto repairs, moving, and large bills.
Without a sizeable nest egg sitting in a savings account, these incidentals can throw your budget off course, and you’ll need help if you expect to get it back on track. While traditional lenders like banks and family are popular ways to cover your debts, these sources aren’t always available. Your family may be in the same boat as you, or you may not have the time it takes to apply for a loan with a bank.
Direct lenders such as MoneyKey are a great alternative to traditional lenders, as they offer quick and convenient payday loans. They’ve eliminated a lot of the red tape usually attributed to borrowing money, so they can review and approve your application faster than ever before — which means, in the case of MoneyKey, you can have the cash you need in as little as one business day.
How Do I Stay Accountable?
Creating a budget as a way to fill your time is one thing. Following the financial plan you made is an entirely different thing. It can be a challenge to follow your best intentions, especially when you’ve had to eliminate a lot of bad spending habits in order to bump up your savings to 20% of your income. Needless to say, it’s very easy to fall off the bandwagon and start ordering takeout, clothes, and other unnecessary items online.
Keep your resolve strong by letting your friends and family know you’re attempting to follow a budget. They can hold you accountable, even if it’s just the thought of their disappointment stopping you from buying another pair of Pumas. You can also program your phone to keep a judgemental eye on your finances with apps that keep tabs on your bank account. Some of the best apps will send you a notification whenever you get close to your spending limits.
By taking the time to answer these questions, you’ll be better equipped to create a budget that will actually work. It may just start as a coping mechanism to keep you occupied, but when done right, it can be a solid method of keeping cash in your pocket. So grab a calculator and start asking yourself these financial questions!