A Sensible Guide to Budgeting
Feeling like your finances are controlling you? Concerned your savings plan (if you have one) won’t meet your retirement needs? Want make sure you and your family can take a holiday every year? To gain control of your finances, start with your budget.
There are two things you need to know about your budget: 1) You already have one, you just need to manage it and 2) Life is uncertain but you can be prepared for the unexpected.
Your budget consists of what you earn and what you spend. It’s that simple. When you recognize that life will happen . . . your laptop dies, your car needs a major repair, your daughter needs braces, following these three basic rules will help you manage your expense, be prepared for the unexpected and save for the future.
Rule 1: Know what you earn, your monthly expenses, what you owe and your assets. Keeping these in your mind at all times will help you make better decisions.
Rule 2: Your home mortgage payment should be no more than 25% of your gross income. Any higher payment will eat into your cash flow and give you less control over your cash flow.
Rule 3: Try to save 30%, spend 60%, enjoy 10%.
Saving 30% ensures that you can meet long term expenses (a new roof, the kids’ braces), unexpected needs (new tires, new tires) and retirement.
Spending 60% covers your basic living expenses – your rent or mortgage, food, insurance, utilities, transportation, child care.
Enjoy 10% for vacation, a romantic night on the town, good old fashioned fun.
Remember: make adjustments as needed and plan ahead.
Managing your budget is just the first step in building a solid financial future. Click here to download Latinariffic’s $mart Guide to Dollars and $ense.