Your Personal Budget Plan
If you’re wondering, the answer is yeah — you should definitely have one. Here’s a quick cheat sheet on the correct order of payments, a hierarchy of personal needs to financially take care of, if you will, every month.
- Pay down your fixed expenses to LIVE— we’re referring to rent, mortgage, car payments, utilities, and food (not going out food, but groceries).
- Pay down your DEBT— come up with a plan of how much you want to sock away every month at your remaining balances so that the number shrinks to the size of a raisin. The point is to do it every month, rain or shine. Consider lowering any high interest debt payments you owe to a 0% interest rate offer through a balance transfer. Check out http://www.magnifymoney.com/learn/balance-transfers/ for more info — it’s a good site for sifting through your options.
- Boost your EMERGENCY fund — do this any way you can. Shit happens to all of us like losing a job, or getting sick, and you need to be able to take care of yourself for a period of time without regular income. Open an account and consider it untouchable for anything other than big-time S.O.S. financial emergencies. What’s the amount you should accumulate and set aside? Add up 6 months of your essential living expenses, and that total number is your minimum. Don’t even think about touching this money to throw your best friend a surprise birthday party. The emergency fund is your personal bailout. You need to put on your mask first before assisting others.
- INVEST in yourself — consider taking a class that would boost your skills, or earning a specialized degree toward a career that would make you happy. The goal is raise your probability of a higher income stream in the future. You’re investing in your productivity.
- Pay for the EXPERIENCES that make you a happier, wiser person — travel. Become more empathetic about the riches you take for granted. Become richer on the inside because it does show on the outside.
- BUY the stuff you want — get a haircut, great shoes on sale, the latest iPhone. If you’ve done the stuff above, you’ll be able to afford it.
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