Everyone works hard 30 days a month for that one fruitful day where he/she receives his/her paychecks. That is the happiest day in any month for a salaried person. However, this happiness is short-lived just as other happiness that is a result of money. The moment you receive your salary, you start thinking about rent, grocery, utility bills, credit card bills, loans, and what not. The first 10 days, and for some even lesser number of days, is what it takes for your salary to disappear and you soon start living with the support of your credit cards again.
However, this does not have to be the case if you know how to allocate your salary. This art of budgeting is very important so as to maintain a decent standard of living both during your working years and during your retirement years. Here are some tips that can help you budget your income wisely.
- Necessities – All kinds of bills form the basic necessities. You cannot find a single person who does not have to pay for their very basic existence that includes food and water. It is thus required to allocate at least 40% of your income towards the essentials.
- Transportation – Do not spend more than 10% of your earnings towards transportation expenses, be it owning a car by full down payment, buying a car on loan, or depending on other means of public or private transport.
- Shelter – Similar to the transportation rule, do not spend more than 20% of what you earn on housing, irrespective of the fact whether you decide to buy a home with one single payment, buy a home on loan, or rent a space to stay. You need to do the math and find the most profitable way around this.
- Entertainment – All work and no play definitely makes each of us dull. Hence, the need for some slight entertainment arises. Allocate 20% of your income towards entertainment, which may include occasional eating out, movies, theme parks, spas, vacations, and others.
- Retirement – This is forms the most important part of your budgeting plan. Preparing for your retirement otherwise, savings for unexpected circumstances is essential. Basic rule states that you need to allocate at least 10% of your income towards the retirement fund.
For some budgeting on their paychecks may be challenging. Hence, they need to look out for other means to increase their source of income. Some examples include investing in real estate, trading in the stock market, making use of an automated trading robot, investing in shares and debentures, and few others.