Budgeting 101 – Sorting Bill Money and Fun Money

Budgeting 101 - Sorting Bill Money and Fun Money

Adulting is hard. No one wants to work hard all week and then watch their paycheck dwindle away as the bills get paid. We’d all like to enjoy some of the fruits of our labor and have a little fun at the end of our week. But if your budget doesn’t allow for it, you really can’t go on those spending sprees like you want.

It’s important that you create a budget for all your expenses, and that you only use what’s left over for your fun money. Otherwise, it can be too easy to confuse what money is pegged for what, and you risk overspending on frivolous items.

Making Your Budget

The most important first step is making a solid budget. You need to include everything on your budget that you will spend each month, including recurring bills like your mortgage, utilities, car payment, groceries, and gas.

Include everything. If you know that you get a latte from the corner shop every morning, include the cost of that in your budget. You need to know exactly where you are spending your money if you are going to get control of your finances.

Once everything has been accounted for, you can see what’s left over for saving and for spending on fun things. Do make sure that you save some though since you never know when an emergency will require a big chunk of change.

Use Credit Responsibly

A lot of people just pull out a credit card when they want to do something and don’t have the money. Or if they’re acting more responsibly, they look into quick installment loans when they have an emergency like the roof needing to be replaced or the car needing to be repaired. There is certainly a time and a place to use lines of credit, but you have to do so responsibly.

Installment loans, student loans, home loans, business loans, and even credit cards can be used wisely to help you meet your financial goals. It is important that when you consider using credit, you look at how it will fit into you overall financial picture. Will the line of credit negatively impact your debt-to-income ratio? Will you be able to meet the monthly payments? Will the interest rate compound the amount you pay so that getting the credit isn’t worth it? The answers to these questions should be overwhelmingly in the positive to make using credit worthwhile, and you should be financing a true necessity and not a frivolous expense.

When to Indulge

All work and no play isn’t good for anyone. You should enjoy your money from time to time. You just shouldn’t do it at the expense of other things you need or when you will have long-term consequences.

When your bills are all paid, you have a clean credit history, and you have a little put away in savings, you can give yourself permission to go on a little spending spree from time to time. Buy yourself that new flat screen you’ve had your eye on. Go on that vacation. Get a new wardrobe. Just make sure you’ve done the calculations first and aren’t just spending on emotion.

Learning about how to keep the money intended for your responsibilities and the money that you can spend on fun separate is an important skill, and it’s not one that many people are able to easily master. Use these tips to set your budget and to spend your money wisely. You’ll have enough to enjoy yourself and you won’t create any big financial problems for yourself.

Editorial Team
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