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Everyone’s financial situation is different. Still, I guarantee, each and every person in the world would love to have the complete financial freedom to spend as much money as they want without any consequences. Wouldn’t it be awesome? Not having any bills or having someone or something else to take care of them?
But let’s wake up from our dream. We do not hold a limitless source of income, and we must take care of our bills and our responsibilities personally. But, what is the key to having healthy finances and not dying while trying? Budgeting, of course!
But budgeting should not be a one-size-fits-all plan. You need to find a system that works for you. Have you tried a percentage-based budget plan?
These plans are a bit different from traditional budgeting, which allows you to manage your dollars on your spending history and make modifications every month. A percentage-based budget plans for your present while also thinking about your future.
It divides your income into percentages that go toward the specific categories that you choose. For example, you can select four categories: disposable income, debt, expenses, and savings.
The percentage for each can vary. The main goal is to cover your bills and allow you to save some money at the same time.
The most popular percentage-based budget is the 50-30-20 plan. But there is also the 30-30-30-10 plan. These plans are very similar, but the main contrast is that the 30-30-30-10 plan limits wasted spending big time.
It also allows you to save more and pay off more significant amounts of debt. The 50-30-20 plan does not explicitly track the spending category causing you to be at risk for excessive spending.
The 30-30-30-10 plan is helpful as a reference for covering your house expenses, savings, paying off debt, and still allowing you to have a little fun.
This system lets you figure out how much you want to put in each category monthly, as well as the order in which you wish to allocate your cash. Breaking it down is super simple, just follow the “bucket” plan.
This is how you’d divide your monthly income on the 30-30-30-10 budget plan:
- 30% goes to the housing needs bucket: mortgage, rent, appliances, transportation, etc.
- 30% should be designated to the “other expenses” bucket: utilities, groceries, clothing, phone, Internet, or school needs.
- 30% to your financial goals bucket: paying off debt and saving for retirement or for an important project, investing, etc.
- 10% for your “wants” bucket: amusement and leisure time like dining out, cable TV, going to the movies, etc.
To sum it up, you’re intent is that your money goes to your basic needs: to saving, to lifestyle choices, and to what makes you smile. For instance, if you take home a net income of $4000 per month, you’d divide the funds like this:
- $1,200 a month for mortgage or rent, any fix-up or appliances, etc.
- $1,200 a month for utilities, groceries, mobile phone service, Internet, and school.
- $1,200 a month to pay credit cards and loans and to put in your savings account.
- And finally, $400 a month for entertainment.
It doesn’t matter if you have a spouse and children or if you just graduated from school and you’re working your first gig. This budget plan works for everyone! This system is a great way to start managing healthy finances and understand where your money is going.
But before you start personalizing your 30-30-30-10 plan, what factors should you consider? The most critical points to consider are:
- Your income. Focus on your net income before preparing your budget plan.
- Costs. Analyze each and every expense you have and record it accurately.
- Balance. You need to maintain stability between your income and how much you spend. This is the key to saving money when you try a budgeting method.
- Goals. You must be sure what your financial goals are and that you adhere to them when creating your monetary plan.
Write everything down! Documenting your financial information will help you keep track of any changes and keep you motivated to stay on track.
Once you have the necessary information to begin your 30-30-30-10 budget plan and are aware of how much you spend on basic needs and wants, remember to pay special attention to your savings and especially your retirement accounts. Don’t forget, this program helps you focus on your present AND your future.
Remember that it’s wise and very responsible of you to have an emergency fund as well. Experts recommend having at least 3 months’ worth of your expenses saved for any crisis. However, you can go as high as saving 9 months’ worth of your bills if your salary allows it.
The Bottom Line
A smart budget plan will allow you to enjoy your present and prepare you for a prosperous future. If you want to take control of your finances and build a healthy economic lifestyle, budgeting is critical.
Although there are many percentage-based plans, finding the one that suits you is a crucial step. The biggest pro of the 30-30-30-10 budget method is that it keeps you from going overboard with the bucket designated to treating yourself.
Sure, going out shopping without thinking of the consequences is fun for a while. When you realize you’ve overspent, however, the festive feeling goes away. Remember, there is such a thing as buyer’s remorse.
What good is the so-called “retail therapy” that provides you some temporary joy if you just end up feeling awful after looking at the financial consequences caused by irresponsibly managing your funds?
Budgeting does not have to feel like a drag. Having your dollars in order will enable you to live free and enjoy your earnings more fully. Once you start experiencing the benefits of this, you will get excited about planning your bills and expenses. Smart economic decisions equal wealth growth.