Everything you need to know about creating, maintaining, and updating your budget, including how the process works. Learn how to make wise financial choices and avoid common budgeting mistakes.
How to Budget
How do I make a budget?
Start by calculating your take-home pay. You'll need to know how much money is coming in, and then you need to start tracking and categorizing your expenses. What are your fixed costs such as mortgage payments? What are your variable expenses such as food? Now you can start developing short and long-term goals.Learn More: 4 Easy Budgeting Techniques
Why do I need a budget?
A budget can put you on a stronger financial footing in your day-to-day life and for achieving your long-term goals. By categorizing and tracking expenses you may find it easier to pay bills on time, build an emergency fund, and save for major expenses such as a car or home.Learn More: 5 Signs You're Living Beyond Your Means
How much should I budget for food?
It varies based on how many people you're feeding. If you follow the 50/30/20 budget plan, you should spend no more than 50% of your budget on things you need for survival such as groceries, utilities, and housing costs. For food, specifically, the USDA has some guidelines for thrifty, low cost, moderate cost, and liberal spending that are worth examining.Learn More: 22 Ways to Fight Rising Food Prices
Do I need a budgeting app?
Budgeting apps can be very helpful for tracking your spending, but they are not for everyone. They can be great for tech-savvy people who make most of their purchases using a debit or credit card. But if you usually use cash, you may find entering your expenses manually to be tedious and unnecessary. For those folks, consider the envelope system.
Paycheck to Paycheck
Paycheck to paycheck is an idiom used to describe spending all of the money from one paycheck before receiving the next one. Individuals who live this way would be unable to meet financial obligations if they become unemployed.
Automatic Bill Payment
An automatic bill payment is a transfer of funds from a bank account or brokerage account to a vendor which happens on a predetermined date. It is most often used for recurring bills.
Household expenses are a breakdown of general living expenses. They include the costs of housing, food, utilities, debt payments, and other costs. The sum of all the expenses is then divided by the number of people living in a home, which then reveals each member's share of the total expense.
A budget is an estimate of income and expenses over a period of time. Businesses, individuals, governments, and other organizations often re-evaluate and adjust their budgets on a periodic basis.
In a budgeting sense, the word "shoestring" is an idiom describing a small amount of money that is inadequate to fund the intended purpose of its use in full. It is most often called "living on a shoestring" or having a "shoestring budget."
Disposable Personal Income
Disposable income is net income; the amount left over after taxes. Housing, food, bills, and debts are usually paid using disposable income. The amount of disposable personal income in a community is closely monitored as one of the key economic indicators used to gauge the overall state of the economy.
Discretionary expenses are often defined as nonessential spending. Eating out, alcohol, and streaming service bills are all examples of discretionary expenses. They are basically the costs that a person or business can live without.