Downtime - Let's take a look at that "Budget"

Paying your bills on time, Cash flow - you have heard those words before but that is not all it means —a budget is also about determining how much you should be spending, and on what. How about having a great tool in your life that will give you peace of mind - especially in times like these. A way to reach savings goals and sustain and improve overall financial health.

There are many tools that can help you get the info you need to keep you on track and figure out how you should be spending your hard earned money. OF Course, it is up to you to adhere to YOUR plan.

So with that said, here are 3 kinds of budgets that you can look into to see what works for you.

Zero-sum: The principle of the zero-sum budget is that you must allocate each and every dollar you earn toward a specific expense, savings account, debt, or disposable income account. This style can help deter unnecessary spending because you’ll know exactly how much you have to spend on what items. The only thing you may need to watch out for is the bigger unexpected items (car tires, new brakes, medical bills) - please make sure you carve out a percentage of your income for these possibilities.

Envelope budgeting: This is a great method to get you out of the CREDIT CARD habit...it is so easy to charge it on that card but so hard when it comes time to paying off that card with more charges than we thought we put on it. Rather than using your credit card to spend, you use a predetermined amount of cash as your spending pool, say $100 a week for the discretionary spending - nothing more = you cannot go to the teller and get more $$. This will keep you in check from spending more than you thought you did. Even if you do this for a short period of time - it is a good exercise in seeing how much you spend. I don't know about you but when I have only so much cash in my wallet and pull it out to pay, I seem to want to hold on to it longer and make better purchases.

50/30/20: The 50/30/20 budget plan is way to organize your spending habits with 50% of your income for essential expenditures, 20% for savings, and 30% for personal lifestyle items.

So how does it work:

Well

Income: First figure out how much money is coming in the door after tax - your net paycheck. If you don''t receive a steady paycheck - figure out the average of your last 3 months take home pay.

Essentials (50%) of this income figure is for those very necessary expenses would almost certainly have to pay. In general, these expenses are nearly the same for everyone and include housing, food, transportation costs and utility bills. The absolute necessities needed to survive. Now is the perfect time to figure out just what needs to get paid on a monthly basis and what you could do without.

Personal: (30%) This category will be the one that makes the most difference in your lifestyle and more importantly peace of mind. When you look at that bank statement and/or credit card statement, what are the items you could live without or downgrade to a lower expense? Do you use every service or product that is charged or auto-debited from your account? Can you sacrifice a month or two for that expenditure? There a so many so-called luxuries in our modern life that we feel have a mandatory status. I encourage you to take a close look and determine if it's worth it.... really... Think about how important "living in the moment is" vs. something that is just a thing or mind numbing TV or Video games. These personal lifestyle expenses include expenses such as your cell phone plan, cable bill and trips to the coffee shop. Other components of this category include gym memberships, weekend trips, and dining out with your friends. Only you can decide which of your expenses can be designated as “personal,” and which ones are truly obligatory. The fewer costs you have in this category, the more progress you’ll make paying down debt and securing your future.

Savings: (20%) includes debt payments, rainy day funds and savings plans or accounts. This is the "get ahead' category where you gain a frustration-free future because you had a plan in place and you took ACTION on your plan. This area should be contributed to after your Essentials and Personal is taken care of but don't short change yourself by saying you will get around to it later or when you make more money or when you get that raise. Trust me that time will not be there and then a crisis like what is going on today will be here.

This is a perfect time to have this type of plan in place but even if you don't - then now is the time to get started.

Establishing good habits will last a lifetime. You don’t need a high income to follow the tenets of the 50/30/20 rule; anyone can do it. Since this is a percentage-based system, the same proportions apply whether you’re earning an entry-level salary and living in a studio apartment, or if you’re years into your career and about to buy your first home.

You too can make the most of your money with careful planning and diligent execution of the plan. Let me know if you need tools to learn more.