Building a budget is the act of combining one’s income, goals, and expenses so it is simpler to decide how much money is spent on an item before one purchases it. Although well over half of Americans receive an annual income, many Americans lack the money-management skills necessary to get their bank accounts under control. If people created a budget that was suitable with their income there would be a lower individual debt throughout America. Creating a budget does not mean that all financial problems are going to be solved, but it is an important step to determining financial health and creating financial stability. Living within a budget isn’t the easiest thing in the world, but it can be a great alternative to worrying about how one will pay for living expenses and the feeling of guilt that goes along with spending money a consumer doesn’t have. Living within a budget will help consumers stop living paycheck to paycheck, get out of debt, and much more.
The first step to developing a budget is to track expenses for at least a month using a checkbook ledger or even a sticky note. Be sure to record every purchase no matter how small, including ATM fees. The number one rule of setting a budget is to not cut all the fun out of your life. Inevitably, budgets that have no room for entertainment are doomed to fail. Instead, learn to moderate. It's not about cutting out everything that is enjoyable in life though.
35 percent of one’s earnings should be set aside for housing and utilities. If you're saving for something specific, set aside another 10 percent into a interest bearing account. A interest bearing account is an account with low interest that must always have money in it. Everything else, the remaining 45 percent, is for things such as food, entertainment, clothing, and vacations.That's where priorities come in.
Financially speaking, of course, you'll never get ahead if you don't also create a plan to pay down your debt.