The New Year is finally here bringing us a fresh start for new opportunities, new adventures, and new ideas. This could be the year you are able to start planning the family trip to Italy; maybe the year you welcome your baby into the world or the year you get to buy that new car. With all the new possibilities 2017 brings, you want to make sure you are ready.
The first step to becoming prepared is having your finances organized. Checking in on your household’s monthly budget once a year is a smart practice. This discipline will help you balance income and expenses while putting money toward financial goals, such as saving for college or paying off debt. Consider the following tips to help you get started.
Follow these tips for creating a household budget.
The 50/20/30 guideline can be easy to follow because instead of telling you how to break down your budget across 20 or more different categories (who could possibly keep track of that?), it splits everything into three main categories:
1. Fixed Costs
These are bills and expenses that don’t vary much from month to month, like rent or mortgage payments, utilities, and car payments. We also include subscriptions, such as gym memberships and Netflix accounts, in fixed costs because you’re committed to paying them on a monthly basis.
When it comes to fixed costs, we generally suggest that you aim to keep your monthly total no more than 50% of your take-home pay.
2. Financial Goals
Consider putting at least 20% of your take-home pay toward important payments or contributions that will help you secure your financial foundation such as paying down credit card debt, saving for retirement and building an emergency fund. But your financial goals can also include larger savings priorities like a down payment on a new home.
3. Flexible Spending
Finally, consider budgeting no more than 30% of your take-home pay toward flexible spending. These are day-to-day expenses that can vary from month to month, like eating out, groceries, shopping, hobbies, entertainment, or gas.
The 50/20/30 guideline is just that—a guide. It can be a helpful benchmark when you’re assessing where your money is going, but it can also be adjusted to your specific lifestyle and goals.
By putting these helpful tips into action, you can make any obstacle easy to overcome. Leave all of the stresses that last year brought behind and take on new chances with ease as it is time to prosper in 2017.