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Budgeting

The infamous swear word in money---but it shouldn't be. Budgeting is you owning your money. Ask a millionaire---93% of them still make budgets and stick to them each month.
Moneyzine Editor
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Moneyzine Editor
1 mins
December 6th, 2023
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Budgeting Fundamentals

Budgeting is a method of controlling debt accumulation by taking a more disciplined look at the inflows and outflows of money into a household or business. It's usually the first debt-elimination alternative pursued by individuals and is often used by debt counselors when helping those in need.

Not everyone has access to software applications or knows how to begin building a family budget. The process starts with a summary of the sources of income and expenses for an individual or family. A realistic, long-term budget is one where the inflow of money (family income), exceeds the outflow (family expenses).

Typical sources of income Include:

  • Salaries, rents, tips, fees, social security, pensions, individual retirement accounts, and interest income. Most individuals have a very good understanding of their sources of income.

Typical categories of expenses include:

  • Housing: rents, mortgages, property taxes, electricity, natural gas, phones, water and other utilities, maintenance, and repairs.

  • Transportation: vehicle loans, gasoline, train or bus fares, licensing, and maintenance.

  • Insurance: health, life, homeowners, and automobile.

  • Food: groceries and restaurants.

  • Personal: medical, clothing, health clubs, organizational fees or dues, personal care, and grooming.

  • Children: medical, clothing, tuitions, school supplies, lunch money, toys, and games, as well as child care.

  • Pets: medical, food, and grooming.

  • Entertainment: vacations, movies, concerts, sporting events, and cultural activities.

  • Loans: student, personal, and credit cards.

  • Other: legal fees, gifts to others, donations, and charitable gifts.

When attempting to balance a budget, it's important to further categorize expenses into those that are mandatory (need to have) versus those that are discretionary (nice to have).

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How much of your income should go toward your mortgage payment? How much for food? What about your car? Everyone has a different opinion, but what are the wise numbers? How much should you spend on that?? Nobody wants to barely scrape by each month and end up with very little in retirement, so let's dig into these numbers and figure out what amounts are best for you!
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