![]() Children's Future (Education, first car, childcare, UTMA, 529, etc.).Retirement (IRA, 401k, Pension, Roth IRA, Simple Plan, etc.).Read: How to Build an Emergency Fund (Step-by-Step Guide).Many people set money aside for emergencies and retirement. Not only do you have to take care of your current needs but you must also think about your future needs. “Paying yourself first” is a common piece of budgeting advice, and I am firm believer in this strategy. If you to save for a specific goal, it's important to treat your saving contributions as regular bill payments. Most people don't think about savings as part of their budget, but it needs to included. Read: 8 Simple Ways to Save on Utility Bills.The most popular expenses in this category are electricity and water. Most of us have to spend money towards utilities as part of our daily living. Investment Income (IRA or 401k distributions).For the purpose of being thorough, I will list many sources of income in this article but never depend on income that is not guaranteed. ![]() As I mentioned here, it's important only to list guaranteed income in your budget. ![]() The most popular source of income is employment income, but it's important to think about all the different ways you make money. These are just recommendations of some of the things that might be included. Keep in mind that you do not have to include these categories in your personal budget. Here are some recommended budgeting categories to help you organize your budget. The IRS does not look kindly on mixing the two together, so make sure you make a separate business budget. If you have a business, it's imperative to keep your business budget separate from your personal budget. Having one simple category titled “clothes” will be okay. If you have problems areas in your budget, like spending too much money on food related items, then I would suggest breaking things down into eating out, groceries, lunch, etc. If you don't spend a lot of money on clothes, there is no need to break things down into shoes, work, gym, dresses, etc. The most important thing to remember when choosing which categories to use is to keep things simple. If you are paying close attention to your spending, you are more likely to catch fraudulent charges or billing errors. Catching mistakes becomes easier as well. Breaking things down will give you powerful insight into where your money is actually going and spending areas that might be causing problems. If you are just starting out and are creating a brand new budget, I do recommend breaking your categories down. Crazy right?īreaking your categories down has a lot of useful benefits. If you are an experienced budgeter like me, you might end up using both methods at the same time. So, the question becomes which method is the best? The truth is, it depends. For example, instead of just listing “food” as one of their categories in their budget, people will list eating out, groceries, kid's lunches, etc. The second way people use categories in their budget is by breaking each category down and allocating money towards each particular thing.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |