Only 30% of Americans have a long-term financial plan that includes budgeting. If you bad with money but are ready to take over your finances, you need to begin with a budget. Your paycheck should be budgeted a certain way if you want to learn proper money management.
Read our guide to learn about how to budget your paycheck.
1. Use Half on Your Needs
The first rule on how to budget your paycheck is to use half of it on your needs. Needs include things like bills and groceries. Anything necessary for your survival.
The needs category will include rent, groceries, insurance, car payments, utilities, and minimum debt payments. This could also include annuities. For more information about annuities and how they can benefit you, check out this blog https://medium.com/@rightwayfundingreviews.
2. Use 30% for Wants
Anything you want that is not essential will be placed in this category. 30% of your paycheck can go to things like dinner, movies, vacations, electronics, and more.
A want is optional which is why it should not take up most of your paycheck. Paycheck budgeting is all about cutting out money you don’t need to spend. Decide what things you want that can be paid for with only 30% of your paycheck.
3. Use 20% for Savings
You should always save some of your paychecks in case of a rainy day. Paycheck saving is an important part of budgeting. Try to save 20% of your paycheck each time.
Money management is important because saving money can add to emergency funds, savings accounts, and investments. You can also add more to your debt payments with this amount to help the future.
4. Avoid Debt
While you are working on your budget by paycheck, you need to avoid debt. Any debt that you have already racked up should be paid at the minimum each month. During the process of creating a budget, try to avoid creating more debt for yourself if possible.
5. Set Goals
Your main goal should be to follow the 50-30-20, but setting other goals is an important part of budgeting too. If you want to save money for something specific with each paycheck, use some of the 20% for savings to add to that fund.
For example, if you want a new car, set aside money for a down payment. Setting this goal will get you to the point where you reach it.
6. Gather Financial Statements
Always keep your financial statements together to ensure you are keeping up with your budgeting goals. Every paycheck stub should be kept along with collecting documents that reflect your monthly spending.
Knowing your income and expenses each month will help you stay on a budgeting track. This is especially helpful if your income and expenses vary each month.
7. Evaluate Results
After you have begun budgeting your paycheck, you need to evaluate your progress. Understanding the progress you have made will help you decide what, if anything, needs to be done differently.
How to Budget Your Paycheck Explained
Being bad with money is a choice you make every day. You don’t have to live like that anymore. Following these paycheck budgeting tips will help get you on the right track.
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