The budget is the quintessential piece of any financial game plan, however, it tends to be a huge challenge for most people. Some people have even done away with using the b-word because of its negative connotation. Why is it so negative? Well, anytime you hear the word budget in the news, it's because the government can't balance it and some item needs to be eliminated.
You never hear the word "budget" and something positive come out of it. This is the exact reason why the average person has such a hard time doing a budget. They are constantly witnessing a group of people (the government) struggle to make sure they can spend money appropriately on a regular basis. Then they look at themselves in the mirror and figure they pretty much don't stand a chance against the abominable budget.
What's the solution? For starters, people need to begin to use spending plan instead of budget. Spending plan sounds so much friendlier. Plus, we all love to spend money, so why not focus more on our spending habits as opposed to cutting things out of our lives. A simple paradigm shift is the answer.
All spending plans are not created equally and you must find one that fits your personality. The 50/20/30 plan is a simple spending plan that most people might actually like doing on a regular basis. Here's how it works: Once you get your paycheck, no more than 50% of it should be spent on essentials…your rent or mortgage/food/transportation/utilities. 20% should be applied to financial obligations…savings, retirement, insurances, investments, paying off debt. 30% is allocated to your lifestyle…so whatever else you want to spend your money on, it’s up to you!
The 50/20/30 plan is a basic framework and its simplicity is the reason you might stick to it. Plus the fact that you're free to spend 30% of your money on whatever you want, should make you a bit happier about doing a spending plan each month.