Thinking about your finances can be overwhelming. To take the next step and set up a budget might send you into a spiral. Diamond Credit Union’s team of certified HERO Financial Counselors are here to offer free advice to help you create a realistic budget.
What Goes Into A Realistic Budget?
Your budget should give every dollar a job. It shows you where you can make improvements with your spending and saving habits. Diamond Credit Union’s Retail Delivery Manager and HERO Financial Counselor, Andrea Sawchuk Moyer, went over the most general categories that you should consider when planning your budget.
Budgeting Rule Of Thumb: The 50/30/20 Rule
Before you read about the components of a budget, keep this general budgeting rule in mind to break down your income: 50% goes towards necessities, 30% towards wants, and 20% goes towards your savings.
This can vary based on your income and expenses. You might not have as much room to put 30% towards wants or 20% towards savings.
Income
The first step in any budget is to record your take home pay after taxes. Depending on what you prefer, you can create a weekly, biweekly or monthly budget. If you have trouble sticking to a budget, a weekly plan can help keep you accountable.
Expenses
“The goal is to ensure that expenses are less than your income,” Sawchuk Moyer said. She went on to break down the common expense categories that you may have.
- Rent/housing
- Basic utilities – cable, internet, electric, water, sewer, trash, phone
- Transportation
- Food
- Insurance
- Loan & credit card payments
- Clothing
- Miscellaneous expenses
You may have more items to add to your expenses such as daycare, subscription services and health and wellness. While you look over your account statements, take note of recurring expenses and create a spot for them in your budget. You should also note “wants.” This could be manicures, dinner out, travel, entertainment, coffee, etc.
Once you record all of your expenses, you should add them together to get your monthly total. If you’re spending as much as you’re making, or find that there is no room outside of your necessities, you need to find a way to make more money. If you see that you’re spending more on things that are wants, such as coffee, you need to stop buying it or cut back until you increase your income.
Savings
“The Savings category is the all-important aspect of ensuring you continue to “pay yourself first” and include monies towards emergency funds, retirement savings, long-term savings, savings for specific goals, and additional funds to pay down debt,” Sawchuk Moyer said.
Sometimes people try to save too much at first, which could leave you strapped for cash or relying on credit cards to buy things. This is where the 20% rule comes into play. It is important to save, but it is equally important to leave room for your needs and wants.
Budgeting Advice
Tiffany Adamowicz is a Membership Officer and HERO Financial Counselor at Diamond’s Pottstown branch. She offered this advice for those looking to start a budget, “Do your best to stick to your budget and hold yourself accountable. You can create an action plan with your goals and hang it on your fridge to help you stay on track. Remember that we are here to help you with your budgeting goals, and can sit down with you to go over the entire process.”
Sawchuk Moyer added this final piece of advice, “Budgeting is not easy, so give yourself grace. Keep your long-term financial goals in mind to help you stay on track, and reward yourself when you hit milestones.”
Diamond Credit Union has Club Accounts that you can open for free to help you separate your money in online or mobile banking. Read Budgeting Digitally Is Easy for more budgeting tips using Diamond’s accounts. You can also schedule an appointment to meet with a certified HERO Financial Counselor to create a budget and action plan.
