Divide your income among needs, wants, savings and debt repayment, using the 50/30/20 budget.
If you have take-home pay of, say, $3,000 a month, how can you pay for housing, food, insurance, health care, debt repayment and fun without running out of money? That’s a lot to cover with a limited amount.
The answer is to make a budget.
What is a budget? A budget is a plan for every dollar you have. It represents more financial freedom and a life with much less stress.
How to budget money
It’s easy to get overwhelmed by the many details included in the budgeting process. Here are five steps to follow.
Step 1. Figure out your after-tax income
If you get a regular paycheck, the amount you receive is probably your after-tax income, but if you have automatic deductions for a 401(k), savings, and health and life insurance, add those back in to give yourself a true picture of your savings and expenditures. If you have other types of money coming in — such as from side gigs — subtract anything that reduces that income, such as taxes and business expenses.