When it comes to making a budget, most of the people fail to stick to it and the reason is not just it is boring and they do not want to continue it – in fact, they do not know how to start it and whether or not they are going in the right direction.
Undoubtedly, budgeting is crucial. To get an insight into a true picture of your financial condition, you need a mechanism and that is where budgeting comes in. Many people think that budgeting means spending less but it means spending right.
It can allow you to track your everyday spending so you know how much and where your money is going out and how much you have left in your account to meet your future expenses. When you have a clear understanding of your money, you easily make a firmed decision.
There are a lot of categories and you do not know how much spending limit you should set for each of them so you can set aside money for a rainy day as soon as you receive your paycheque. Here is how you can set a monthly budget percentage.
Set different categories
You should set different categories to set the spending limit. Most of the time you decide to save 10% of your salary for emergency reasons and the rest you use for recurring expenses, but this is not a smart approach to take full control over your money.
Before you make a decision where to cut down, you should know how much money is going where. This is why you should set categories as follows:
- Housing cost
- Personal spending
Allocate the percentage
Once you have set the different categories, the next step is to allocate the percentage of money you will spend on each of them. A rule of thumb says that you should put aside 10% of your income.
Likewise, grocery budget should be between 10 and 15%. Sometimes you may prefer to dine out and as a result your budget can shatter. This is why you have a leeway to set it somewhere between 10 and 15%. Try to look back at your previous spending to see which percentage of your money went toward food budget.
This can help you get a better idea. Utility bills do not need to consume more than 5 to 10% of your monthly income especially if you are out throughout the day.
Housing budget needs to be a very big budget. Since you have to arrange a deposit for your mortgage, try to fix it at 25%.
Transportation cost should be up to 10% and it must include fuel charges and parking fares.
Set the health budget somewhere between 5 and 10%. It can help you cover some expenses for your medicines or consultation charges that your insurance does not cover.
As far as it is about the insurance budget, it depends on the number of insurance you have bought. Of course, you will need a bigger budget than anyone else who does not own a car. This is why the set limit can be between 10 and 25%.
Do not compromise with your entertainment budget. Recreation is also a must. It should be between 5 and 10%. Personal spending budget should not be more than 10%. It includes your haircut, cosmetics, clothing, and the like.
Note that this is estimation. It is not set in stone that everyone should follow the given percentage. To set the right budget percentage, you will have to check your financial condition.
It depends on your monthly income too. It is not surprising to have set the wrong percentage for each or some of the categories. To fix this issue, you should ask yourself the following questions:
- What are the areas where you can cut back on?
- What are the areas where you should increase the contribution?
- Is there any category that you need to create?
How to manage it with debts
If you have debts to pay off, you will naturally create a new category dedicated for it, but remember that this will affect your other categories. This is why it is suggested that you should settle your debts as soon as possible and then get into the habit of percentage budget.
If there are long-term instalment loans, it will be a part of your budget. However, if you have a small debt, make sure that you pay them off as soon as possible. If you cannot pay them back outright, you should make a repayment plan.
Talk to your lenders if they can accept minimum repayments and once you settle the whole of your debt, make sure that you do not keep borrowing from money lenders in Dublin for regular expenses.
Online lending has been designed only for tiding over during financial emergencies. Further, if you are looking for instant loans in Ireland, research so you choose a lender that offers money at affordable interest rates.
Use budgeting apps
There are free budgeting applications that you can operate through your mobile app and access all your accounts and transactions in one place.
These apps can help you manage all categories because you will get an insight into how much money is going out. Since you will have a clear idea of how much you have right now, you can easily decide to
If you want to control your spending with the help of a budget, you should create different categories and set the spending limit for each of them.