Not a fan of budgeting? You’re not alone! 46 percent of households do not stick to a budget, and 38 percent say they try. That means only 16 percent stick to a budget! Although it’s difficult, budgeting is worth the effort. Having and sticking to a budget can help secure your present and future financial success.
The Real Reason to Budget
The idea of a budget is not to restrict yourself, especially not painfully. Instead a budget helps you make calculated decisions about what you can afford and the changes you need to make to reach your financial goals. These changes don’t have to push you past your comfort zone. Part of budgeting is finding solutions that work for you.
Begin by reviewing what you spent last month. Nowadays that’s easy with online statements. Simply tally up what you’ve spent using categories that make sense to you: groceries, rent or mortgage, utilities, vehicles, fun, clothing, etc. Going through every line item to see if you’re happy with your decisions is a good idea.
Two of the most pressing budget items are rent and savings:
Is Your Rent Affordable?
Property managers use a simple calculation to ensure applicants can afford the rent. You can use the same calculation to find out what an affordable rent or mortgage is for you. Simply take your pre-tax annual salary and divide it by 40. Our calculator can help you find your ideal rent based on your income.
But what if you discover your housing expenses are too high? If you own your home, chances are you’re locked into your mortgage for some time. But, you do have an asset —space! A long term homeshare can give you the extra income you need to balance your budget. With this legitimate legal arrangement, you’ll have a roommate who shares your living and kitchen spaces and pays you regular rent. Wondering how you can find a roommate you’re comfortable with? HomeShare Alliance specializes in matching householders with the right housemate.
How Much Should You Save?
The first time you make a budget you’ll likely find that you’re not putting as much away for savings or retirement as you’d like. In fact, a recent poll showed that 46 percent of respondents save less than ten percent of their income.
How do you find the money to save if your budget is already tight? Go through your budget and look for spending habits to cut that are not contributing to your long-term financial stability. Then, create a savings goal and review your budget at the end of each month to see how you do. If you’re still short consider ways to earn extra income (a part time job and homesharing are two potential options).
Ideally, you’ll join the ranks of the 14 percent of people who save more than 20 percent of your income. But, if you struggle to make saving a priority, you can set up automatic deposits right to your savings account.
Tackling these rent and savings will make a big difference in your bank account. But there’s no reason to stop here. Reviewing every line item on a regular basis is the secret to long-term budget success.