As I mentioned earlier, it’s Women’s Money Week, and today’s topic is budgets!
BUDGET! It doesn’t have to be a scary word that brings shame. Even people with large incomes should have budgets. It doesn’t mean you are poor and living an uneventful and unsatisfactory life because you can never spend money. It just means you know how much money you have coming in, and you are aware of how you spend it.
How do you Budget?
Of course you can search online or read books that will tell you that you should spend x% of your income on housing and y% on debt repayment. Keep in mind these are guidelines. There is always room to change your budget, and make sure it suits your needs. If you want to spend half your income on your fancy brand new car, that’s fine. But you need to budget for it, and know that other parts of your life will have less money allocated to them. Your budget needs to be realistic to your lifestyle, if there is no wiggle room; you are just going to end up going into debt. If you know you are going to buy clothing and eat out once and a while, budget for it. There is no sense having a budget that you know you won’t stick to, or worse, one that doesn’t balance.
If you do need help in figuring out approximately how much you should be spending on things, here are some general guidelines (according to Gail Vaz-Oxlade – financial expert, author and tv host):
Debt repayment 15%
See how that adds up to 100%? You need to spend less than you make. If your housing is only costing you 30% of your income or you have no debt to repay, than you can shift things around till it fits your situation. We are debt free (except for our mortgage), so we can allocate more money to other areas. Transportation for us is a big one right now, my husband commutes into the city for work 3 or 4 days a week, the commuter train and the subway cost us a small fortune. We also bought a van this past weekend, so now we have a car payment added to our Transportation portion of the budget. We are still shocked that on just my husbands’ salary we were able to purchase a brand new van; amazing what you can afford when you are debt free and smart with your money!
So we have established how to spend less than you make, but what if you don’t want to. That’s right; many people feel they deserve that designer bag, fancy car, or annual vacation. Entitlement seems to be a big problem these days. And a lot of times, your budget doesn’t allow you to have those things. If you don’t make enough money for the lifestyle you are living, either find a way to make more money or change your expectations. And don’t think that it is only the big ticket items that can hurt you financially; a $5 latte every day can be just as bad. I always see people on twitter, facebook, and even on their own blogs, complaining about how they cannot afford a new car, a bigger house, or an exotic family vacation. Yet they constantly talk about the new clothes they buy and the expensive coffees they drink. Small purchases DO make a big difference in your budget, and it is often the most overlooked portion of your spending. I bet you did have a rough day, and do deserve that takeout or that pretty new sweater, but is it smart to act this way all the time?
So go on, make a budget! You will feel at peace knowing where all your money is going, and you might find that you have more money than you thought. Don’t forget to stop by Women’s Money Week for more great posts on budgets, as well as lots of other topics this week.