4 Budgeting
What is a budget?
A budget is a plan that helps you manage how much money you earn and how much you spend. Think of it as a roadmap that shows where your money is going each month. Without a budget, it’s easy to spend more than you earn or forget to save for future goals. A budget helps you stay in control of your finances.
The 50/30/20 Rule
This is a simple budgeting method that helps you divide your income into three categories:
- 50% for Needs: These are essential expenses like rent, groceries, transportation, and utility bills. Basically, things you must pay for to live.
- Example: If you earn $1,000 a month, $500 would go toward your needs like rent ($300), groceries ($150), and utilities ($50).
- 30% for Wants: These are non-essential items like eating out, entertainment, or shopping. These are the fun things you spend on but aren’t absolutely necessary.
- Example: If you want to go out with friends, this money can be spent on movie tickets or eating at a restaurant.
- 20% for Savings and Debt: This portion goes into your savings or toward paying off any debt (like a student loan or credit card bill).
- Example: You can save $200 per month for future expenses or use this amount to pay down a student loan.
