Tips for starting the year: how to make a budget

By The Associated Press


04/01/2020 | 10: 06 a.m.

Making a budget can be boring, but there are ways to make it easier. Here we offer some tips on how to keep track of your income and expenses, so you can have time and money to do the things we have more fun.

THE PROPORTION 50/30/20

There are countless budgeting techniques available, but one of them is particularly effective and easy to remember: The 50/30/20 ratio.

For this, expenses such as mortgage, rent, car payments and electricity bills must be taken into account, as well as more variable expenses such as travel or streaming services.

In summary: take the income and from them do not spend more than 50% on fixed expenses such as the mortgage. Use 20% on savings and cancel debts, and use the remaining 30% for various expenses.

Katie Brewer, a financial advisor who works at Your Richest Life, favors this system for its flexibility.

“It’s much less expensive than having to put $ 200 for this, $ 300 for the other and $ 127 for the other,” says Brewer.

It is also a relief, because this method allows you to spend money on things that are important to you, your family or your lifestyle.

UNDERSTANDING THE MONEY FLOW

Once you have an idea of ​​your expenses, start keeping track.

“It’s good to have an account to pay bills and one for expenses,” says Brewer. “Nothing to cheat, what there is is what there is.”

Divide that money according to the percentages as soon as it enters your bank account, Brewer suggests.

Robert López, financial advisor and founder of the financial planning company FP Guidance, advocates a similar strategy. While some people prefer to have it all in one bank account, he says that having separate accounts for separate things can help, especially if you name it.

For example, one can have an account and call it “Honeymoon Funds”, so that you will not get money from there, unlike if you had an unnamed savings account.

However, there is no stopping there. There are methods to make sure that one is not spending the mortgage money on luxury services.

Lopez recommends getting cards of different colors for different bank accounts, if the bank offers that option.

So, for example, the card you use for the supermarket is red, but the one you use to go to the movies or the theater is blue. Then you can check with your bank’s app to make sure you are spending in the appropriate categories.

NEVER GIVE UP

Remember that having a category for craving expenses in your budget does not mean you can go on an expensive vacation or shopping frenzy for no reason. López recommends using it as an incentive to keep us in the correct budgetary practice.

“If you dedicate your entire budget to basic needs, more paying debts, more savings, you’re never going to have fun and you’re not going to follow,” says Lopez.

Your budget is something that is constantly evolving and there will be months that you will spend more, months that you will spend less.

For example, you will spend more money buying gifts in December than in March.

Brewer recommends using a debit card instead of a credit card for variable expenses, so you can be proactive and not reactive. Once you get used to it you can use the credit card again. It is also useful to use cash. For example, if you bring only $ 50 in cash to the concert, you know you won’t be able to spend more of that.

Everyone must find their method. According to Brewer, making a budget is a personal skill that develops over time.

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