5 Budget Tips to Help You Save for Beginners
5 Budget Tips to Help You Save for Beginners

5 Budget Tips to Help You Save for Beginners : Why A Budget Matters in a Financial Crisis The Congressional Budget Office reported a massive $900 billion deficit, which is 4% of the gross domestic product. This deficit is a danger to America’s economic stability, which portends a growing crisis with the deficit surpassing $1 trillion by 2022.

Credit Cards Debt

The worst model for creating a budget is the Congressional Budget Office which is basically ignored by Congress.  The most common debt is credit card debt.  Those who use the credit card to enhance their budget will most likely face a budget deficit at the end of the month.

America’s credit card debt, according to New York’s Federal Reserve Bank, has increased by at least $26 billion more than the amount of debt before the 2008 financial crisis.   The card issuers have divided credit card users into “transactors” and “revolvers.”  If you are in the “transactors” group, you are not a debtor having paid off your total card debt timely each month. Revolving card balances, in April 2019, topped $1.0645 trillion, which amounts to the first time the debt was over a trillion since the September 2017 Great Recession.  The actual credit card debt is determined by how it is measured. Credit card delinquency rates are being past due by 30, 60, or 90 days.

Budget 

Creating a budget is critical for financial stability.   Even John D. Rockefeller had a Budget to pay his business tax. Planning a budget when you are already in debt is like closing the door after the horse escaped.  As a result, there is significant resistance to develop a budget because a) you have to start to sacrifice and change your behavior, b) the surrounding people are enjoying spending, c) you may not receive support from others to repay your debt, d) you may have unexpected expenses and e) it will take a long time to pay off your debt.  When preparing your Budget’s expenses and income, you might find valuable online budgeting tools such as Quicken.  There are also free online budget planners.  There are tools here that also prepare you for filing your IRS personal and business tax forms.

Your Budget must reflect the real world.  The budget always makes sense, but starting the task sometimes requires overcoming procrastination.  Mark Twain mused that “The secret of getting ahead is getting started.”  

Getting Started

The principles of starting a budget are to prioritize your financial life according to five categories such as establishing a) wants and needs, b) calculate your expenses and after-tax income, c) develop savings, retirement,  d) determine your debt payoff goals and e) record spending and track progress.   Beware of the pitfalls of budgeting. When you could not pay the entire amount of the bill that came in the mail, did you remember what you bought or why?  Did you think you had extra cash to spend?  Check your budget.

50/30/20 Budget Rule

This rule in budgeting, which is advocated by Sen. Elizabeth Warren, is simple, clear, and consistent with the five categories. This rule is applied after you have determined your wants and needs, specific and discretionary spending, after-tax income, and expenses, you established limits for savings and retirement and decided how to allocate your savings; after at least one month, you have to determine whether you have stayed in track with your budget projections.

5 Budget Tips to Help You Save for Beginners
5 Budget Tips to Help You Save for Beginners

As an example of the 50/30/20 budget, 50% of your after-tax income would be for your needs, such as housing, utilities, car payments, insurances, prescriptions, and food. Deciding wants and needs can be challenging because it requires you to evaluate your lifestyle. The dividing line between the two is a decision as to what items you can forgo. Paying the minimum on a credit card is a need; otherwise, your credit score would be harmed. Your wants can be limited to 30% of your Budget. There are those whose major entertainment is home cable at $100/month. However, paying the price for new clothes may exceed the Budget for wants when adequate discounted clothes are available.  Savings for an emergency or retirement fund should be 20% percent of your budget. 

How Do You Create a Budget For Almost Anything?

Conclusion

It’s time to draw a line in the sand and face your debt and live a real life. The object of a budget is not to experience poverty but a life of controlling your debt and moving forward to avoid poverty.

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