Getting good with money is a challenge for many of us. Creating and sticking to a budget can be somewhat of a mystery, especially if you have never made a budget before. However, making a budget – no matter how much you earn – can take away a lot of the stress associated with money.
Eric Nelson is a Principal Broker and Finance Expert who specialised in insurance products and financial services. He is also an active NAACP member and proud social justice advocate. He gives his advice for people looking to make their first budget and get better with their money.
Before you make your budget, you should know how much you are spending in a given month. Take the time to go through your bank statements in a judgement-free way. Just observe how much you are spending, and in what categories.
Next, you need to determine how much money you make each month. This can be tricky for freelancers who make variable incomes every month. In that case, go with the lowest amount of money you would normally expect to make in a month.
When it comes time to sit down and plan out your budget, start with the 50/30/20 method. This divides up your monthly income into these sections:
- 50% for absolute essentials. Rent, car payments, groceries, gas, etc.
- 30% for discretionary spending. This is for all the fun stuff like restaurants, clothes, travel, subscriptions, etc.
- 20% for savings.
This budgeting method doesn’t suit everyone’s lifestyle, but it is a great starting point. Remember, the budget should work for you to make your life simpler, so adjust accordingly.