Making a budget is a necessity in these modern times. You never know when an unexpected expense can wreck your current financial plan and force you to cut down on your daily expenditure significantly. Thus, it is essential to have a budget in place to know how to deal with these unforeseeable circumstances.
Now that we have established the importance of a budget, the next question that most people ask is, what should a good budget include? To make things easier for our users, we have compiled a list of all the factors that you need to include when making a budget.
The first thing that you need to enter in your budget is your income. The need to mention your income in your budget is a no-brainer as any budget is built around the income. If you earn a lot, you can be more lenient with your budget, but if you earn less, consider the budget to be set in stone.
The second item that you need to put in your budget is your housing payments. Remember that it is essential for you to have a roof over your head and you simply cannot afford to lose your housing. Most people have high housing payments, while some of us are lucky enough to pay only a small fraction every month. Regardless of their magnitude, consider them a necessary evil, so make sure your budget accounts for them.
As mentioned above, there can be many unforeseeable circumstances that can effectively cripple you. To make sure that never happens to you, it is important to set aside some money for the proverbial rainy day. You can do this by setting a minimum requirement for an emergency fund in your budget. Know that you can never go back on the amount you specify as your monthly fraction as it will be designated to the emergency fund column in your budget, so choose wisely.
There is no question that you will have to give gifts over the course of a calendar year. This includes gifts for your mother on Mother’s Day, for your father on Father’s Day, for your friends on their birthdays, and for your significant other on anniversaries. We all know that we have to give gifts during these occasions, so it is better to set aside a little money every month that goes directly to funding their purchase.
Much like housing payments, you must also accommodate your debt payments in your monthly budget. This includes non-flexible debt (like credit card debt) and relatively more flexible debt (e.g. if you owe a close friend). Know that it is never nice to make the other party constantly remind you that you have fallen behind on your debt payment. You can make sure that this never happens by making room for debt payments on your monthly budget.