What Should You Include In A Personal Budget?

At a time when the cost of living seems to go up with each passing day, budgeting your finances and saving for the future have never been more important. It’s easy to find yourself caught in the relentless currents of rising prices and debt while trying to find a balance between today’s expenses and tomorrow’s security. You are not alone. The first step to finding better financial stability is to understand your spending and what types of things are essential versus things that are extra. 

There are four primary categories of spending that will help you plan your budget:

1.) Needs like housing and groceries

Start by budgeting for essential expenses. These are nonnegotiable items that you can’t comfortably live without, and they form the foundation of your budget. Allocate a specific percentage of your income to cover these necessities, ensuring stability and security. Needs can include:

• Mortgage or rent
• Transportation
• Utilities
• Phone
• Internet
• Groceries
• Childcare

2.) Wants like fashionable clothing and dining out

While needs are essential, even with a strict budget it’s equally important to budget for some of your wants. You’ll probably need to reduce your spending in this category, but you don’t want to get rid of it entirely. No budget is ever exact every month, and the wants category is where you have a little wiggle room. Prioritize the things that make you the happiest. This will allow you to enjoy life while maintaining financial responsibility.

3.) Debt repayment

Going into significant debt is the worst thing you can do when you are on a budget. If you have high debt, you will continue to fall further and further behind as interest payments increase. It’s important to prioritize paying your debts off as quickly as you can. Start with the minimum payments in your budget and resolve not to add anything to your total debt. Then devote any additional funds you can toward the balance to help accelerate getting out of debt.

4.) Saving for expenses and retirement

Everyone needs to save money for an emergency fund so you can take care of unexpected expenses. Creating one should be a top priority. Most financial professionals advise having three to six months of expenses for basic needs saved up. That way, when your car needs a repair or you have unexpected medical expenses, you won’t have to scramble to redirect important portions of your budget. Once you have your emergency fund in place, you can adjust your savings toward other things, like a vacation fund or retirement. Source