If you’re a guy who doesn’t want to make a budget plan for himself, we don’t blame you. Budgets sound boring, tedious, and a little intimidating — and we always imagined having one would force us to stop spending money on fun stuff like booze, gambling, and fast cars.
But making a budget plan doesn’t have to make you miserable — and it can even prevent it. “Most people only become aware of their finances once there’s a problem,” says financial whiz Liz Weston, author of The 10 Commandments of Money ($12 @ Amazon.com). In other words, if you make a budget before there’s a problem, there won’t be a problem. You can also look at taking out a personal loan to help with your finances. A personal loan is an effective way to help with your budgeting, especially one that provides a low-interest rate.
And we know how to make it easy in three easy steps …
1. Pay Off Your Credit Cards
Okay, that’s easier said than done — but if you’re buried in credit card debt, we’ll show you how to get out of it. Point is, you’ve got to do whatever it takes to make it happen. Let’s say you charge a $1,000 TV and then pay the minimum $25 per month with a (modest) 17 percent interest rate. It’ll take you almost five years to pay it off … and you’ll have paid an extra $452 in interest.
“The only way to use credit cards is to pay your balance off in full each month — even if that means eating Ramen noodles until you receive your next paycheck,” Weston says.
2. Track Your Spending
If you still use “paper” to do your banking like some grandpa in olden days, it’s time to set up online banking. It’s free, secure, and allows you to easily make transfers and view your credit and debit card balances.
You can also use Mint.com, a free money-management website that synchs with your bank and credit card accounts and separates your transactions into colorful pie charts. Registering with Mint takes about 10 minutes; you’ll need your bank account info and logins for your credit card or loan accounts. After that, the site does all the heavy lifting (and calculating).
“One or two weeks should be enough time to track your expenses and see where you need to make adjustments,” Weston says. “Those adjustments might include cutting back on going to bars or dining out, but if you still see a problem with your spending, it’s usually because overhead expenses, like how much you’re paying for rent or your car, are out of whack.”
And that’s where the 50/30/20 budget comes in handy.
3. Make a 50/30/20 Budget
It’s a budget, not a magic formula — so don’t expect it to lift you out of the red and into the black within days. But here are the basics:
50 percent of your after-tax income is for things you have to shell out for, like shelter, transportation, insurance, groceries, minimum loan repayments, and utilities.
30 percent of your after-tax income is for beer money, vacations, trips to the movies, presents for your girlfriend, or presents for yourself. Basically, it’s for all of the things you want to buy.
20 percent of your after-tax income is for retirement savings, an emergency fund, and any loan payments above the minimum. Whether you’re contributing to a 401(k) plan, IRA, or socking cash away under mom’s mattress, make these transfers automatic so you won’t see (or spend) the money.
Now, the numbers may look ugly at first, and that could mean a few things: You might need to supplement your income with another job, try to refinance your mortgage or car, or move into smaller quarters. Whatever the case, don’t be discouraged; even the expert ran into trouble.
“The first time my husband and I tried this, what should have been the 50 percent portion was actually taking up 65 percent of our income,” Weston admits. “And I’ve spoken to people who were running at 85 percent. So you won’t get yourself on target right away, but you will have a goal to reach.”
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