Creating a solid budget will increase your happiness because it will reduce your money stress. Once the budget is in place, you simply have to follow the guidelines each month. No more fights with your partner about money problems, and no more worrying about how to pay for emergencies. Know what’s even better? You can indulge yourself each month with money that was set aside for a treat with no feelings of guilt! How fantastic is that?
- Plan for the future.
Budgeting can eliminate future stress by having money set aside for upcoming expenses, as well as emergencies. If your car is getting older, the kids need new shoes, or you want to upgrade your computer, there’s no need to worry, because the money will be set aside for these costs. Look ahead to possible expenses and save up for them to avoid future debt.
- Plan for treats.
Don’t forget to include occasional treats in your budget. This includes tasty lattes, cute shoes, and trips to the beach. Just make sure that your treat stash is a reasonable portion of your budget.
- Plan basic expenses.
Certain expenses are non-negotiable. After all, everyone has to eat, get to work, and pay utilities. Who wants to have to skimp and only be able to afford the cheap toilet paper? Um, only no one! But, how do you decide what’s reasonable for your financial situation? Well, financial advisors determine spending categories based upon percentages of one’s income.
Forbes magazine offers the following basic percentage ranges to help you decide how your money should be divided:
Housing–25 to 35 percent
Transportation–5 to 15 percent
Food, including eating out and groceries–10 to 15 percent
Personal Care, including haircuts, clothing, and shoes–5 to 10 percent
Health Care, including insurance premiums–10 to 15 percent
Debt repayment, not including mortgage–7 to 15 percent
Utilities–4 to 7 percent
Entertainment–1 to 5 percent
Notice that if you take the maximum percentage in each category, you’ll total more than 100 percent of your income, which isn’t sustainable. You have to figure out which percentage is most realistic for your situation. Plus, if your current home or rent is more than the suggested percent, for instance, you will have to make the adjustment from another area. If you’re still having trouble balancing the numbers, a financial counselor can help.
Additionally, there is no category for saving or investing, something that you’ll definitely want to include to avoid future stress, and we all know that stress kills happiness! A fund for emergencies is a must do as well, even when you’re trying to pay off debt. Experts recommend setting aside at least several thousand dollars (no, not all at once!) for the unexpected. Squirrel away as much as you can as you go. You will thank yourself later, we promise!
Play with the numbers and see how you can make it work. If it’s still not working well after a few weeks, try flexing your categories a bit. Nobody gets a budget perfect on the first try, so don’t get discouraged. When you do find your sweet spot, be sure to celebrate with a little that you set aside for fun!