By Ed Smith-Burns, community partnership director
Creating a personal budget
This month we are exploring ways to create financial wellness for ourselves and our families. An important step is to create a personal budget. By doing this, we can give ourselves freedom to make clear decisions on how we will spend the money we have available to us.
The process of creating a personal budget includes three steps:
- Document your income and monthly expenses. Remember to include all sources of income and also any expenses that may come up occasionally or unexpectedly.
- Track both your income and monthly expenses for at least three months. This will give you time to watch for any variations from one month to the next, so that you can create an average total for your monthly income and expenses.
- Consider following the 60-20-20 rule. This means planning to use 60 percent of your income for necessities, including rent or mortgage, groceries, utilities, car loans, and other monthly expenses; putting 20 percent of your income into savings for future expenses, emergencies, or retirement; and using 20 percent of your income on discretionary spending, including going out to eat, going to the movies, taking trips, or other things that bring you joy and happiness.
Sometimes it isn’t possible to save 20 percent of your income or spend 20 percent on activities that bring you joy. You can adjust your plan based on your personal expenses and income. Remember to draw on other types of resources available to you, including community and family support.
Tip:Â Find an app to put on your phone to help you keep track of your budget. That way, you can enter income and expenses no matter where you are. An app can also offer tips to help you stay on track.