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A budget is a spending plan based on income and expenses. In other words, it’s an estimate of how much money you’ll make and spend over a certain period of time, such as a month or year. (Or, if you're accounting for the incoming and outgoing money of everyone in your household, that's a .)
Budgeting can involve making a comprehensive list of expenditures or focusing on a few categories. Some people prefer to write their budget out by hand, while others use a spreadsheet or . There’s no correct way to budget — what works for one person might not work for another.
That said, the is one of our favorites. This method suggests you spend about 50% of your monthly after-tax income on necessities, 30% on wants and 20% on savings and paying off debt.
Budgeting isn’t about depriving yourself; it’s about taking control of your money. shouldn’t feel like a punishment. Remember, it’s a plan for all of your money — that includes money for fun stuff, too.
A budget doesn’t have to be rigid. In fact, it should change as your circumstances change — when you get a raise, for example, or become a homeowner. The idea is to make your budget as personalized as possible, leaving room to adapt. Surprises (and mistakes) will happen.
Budgeting benefits everyone, not just those who struggle financially. It encourages you to live within your means and put your money to work in the best way possible. Think of a budget as a steppingstone to your . It can help you:
Ready to give budgeting a whirl? Start with the basics. That includes outlining your income, account balances and debts, and tracking expenses. Then, identify your priorities and find for your needs.