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What is an Budget?
Each month I make $1500. How do I use that $1500 perfectly to pay all my bills and buy groceries and non-food items without spending more then $1500?
I need to make an list. I list all my “Needs” and “Wants” on paper. For example….
Need – Food, Cleaning Supplies, Living (rent payment/water/electric/gas), Feminine products (If your an woman), Phone
Want – Movie Tickets, Cable TV, Fastfood, New Laptop, New Phone, Clubs (In today’s world, going to Clubs every friday night is normal, but it’s not an healthy place to spend your money)
Needs are thing’s that you must spend your $1500 on. Wants are thing’s that you can live without.
What about money left over?
So you paid all your bills that are in the “Need” classification and you now have $200 left over. What should do with that extra money? Maybe get something on the wants list? The best thing that you can do with the left over money is put it all in a savings account or in an retirement account. This way the $200 is collecting interest each money and now your money is working for you, instead of you working for it.
I have $6000 in an 401k account and this past quarter I received around $700 as interest. That $700 was left in the 401k account and on the next quarter I will receive an higher amount for interest, because my investment amount grew $700.
So when Budgeting, You must figure out what your “Needs” & “Wants” are. Once You figure that out, then pay your needs first and then if you have money left over, put it in an savings account for it to collect interest. The Goal is to make money work for you, not to make you work for it.