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Making of a Rough Budget

October 1st, 2006 at 11:49 am

We are about to talk about budgets so hear me out before you click on the little X at the top of screen! Even though I do not believe in a strict budget, I still believe that a rough budget will help you. Make it a loose budget using percentages of your income instead of making a fixed amount for activities, bills, and food. Your life demands breathing room and flexibility, and your budget should be the same way.

The first step to making a realistic budget without it being chiseled in stone is to decide how much money you want to put into your budget. A lot of people donít put in all their income in their budget. Most people will save a portion of their money before they want to pay for things. *Paying yourself first: see my top 10 ways to save money* Now, what should you do with the money after youíve saved your 10-20%?

Here are my recommendations of what should be paid off beginning with the most important.

1. Rent or mortgage (40-45% of your income). This is a reoccurring cost that you will have to pay on a monthly basis - unless you like living outdoors. If you do not have any kind of living expenses because you have paid off your house, or if you are living with your parents, you should be putting the money you would be paying in rent/mortgage into your savings account. *A good mortgage calculator to make your rough budget*
2. Food and necessary bills (20-30%). What do I mean by food? NOT the food when you go out for dinner. Food you purchase at grocery stores that you will be eating on a daily basis. You need money for food or else you would die of starvation (I do not recommend doing that). The bills that are essential for a healthy lifestyle, such as water, electric, gas, and insurance bills are right after food. *Learn how to lower your utility bills*
3. Secondary bills (10-15%) - such as cable, internet, phone, and cell phones - come in third. These services are usually perks, but for some people these costs are also a necessity. Technically you could live without them, but a lot of people will argue this point. If you need to reduce these costs, but you cannot survive without them go for the bare minimum.
4. Fun and leisure activities (10-15%) are still a must. A lot of personal finance advisors, such as Michelle Singletary, recommend dropping any activities that will inevitably get you into serious debt. BUT, in my opinion, Singletaryís advice takes the fun out of life. She is a huge penny pincher when it comes to finance, and I donít really agree on anything she has to say (sorry about the rant but I watched her show last night and I couldnít help myself from pointing and laughing at the TV).

3 Responses to “Making of a Rough Budget”

  1. Ima saver Says:

    I have had a written budget for over 40 years. It is not etched in stone. If I am short one week, my christmas account might not get any money. I pay the essentials first and the not so essentials last.
    I have an allowance of $120 a week, sometimes more. that covers my gas, buying liquor, eating out and anything misc. I need like vitamins, makeup, grocery store, etc.
    I don't see how people live without a budget!

  2. JRBeaudry Says:

    Totally agree. A new thing that I just started doing that can get you out of debt is write a detailed plan of how you are going to actually do it.

  3. JRBeaudry Says:

    P.S. The way to do it is write down a "short-term/long-term" goals of only one year. Short term= less than 4 months and long-term= above 4 less than 12. I want to pay down all my CC by May. I am also renting out my whole house and moving back home so I can accomplish this task much faster. Good luck!

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