If you’re like most people, you either either don’t have a budget or the one you do have is in your head and vague at best. However, you probably also know that these two methods are far from ideal. So consider the below method to create a simple budget you can easily follow.
Although it’s challenging, the cornerstone of this budget method is to allow only 60% of your monthly gross to cover your monthly expenses. This keeps things simple and that hard-and-fast number makes it easier to restrain yourself from letting expenses spill over into taking up more and more of your money.
What becomes of the other 40%? You’ll use 10% of it to fund your retirement. Having a 401(k) makes this even easier. Another 10% is used for long-term investments like stocks or mutual funds. However, if you’re currently in debt, use this money to help pay that off. The sooner you’re out of debt, the better and then it makes sense to use this money for long-term savings.
Another 10% goes to your short-term savings. This is money that you’ll eventually tap into for things like auto repairs, medical costs your insurance doesn’t cover and things like holiday and birthday gifts or plans. Don’t be afraid to spend this money when the appropriate times come along. That’s what it’s there for. Otherwise, you’ll go into further debt or draw the money from other places that don’t make sense.
Finally, you have 10% set aside for whatever makes you happy. Go have drinks with friends, see a movie, buy that next book in the series, etc. Like the last 10%, recognize this money exists for a reason and then don’t be ashamed about spending it.
Unlike budget software that gives you a million different categories or versions that otherwise make putting money aside way too difficult, the above is both simple and effective. That means you’ll have an easier time following it and better results for doing so.