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Financial Literacy – Back to the Basics With Budgeting

Every year I offer a free budgeting class via on-line or at local libraries to help people get their finances in order. Although you hear many financial professionals giving the advice to others that they should create and stick to a budget, mot never really explain how to actually accomplish this task.

A budget basically tells your income what to do. You start with a 100% of your net income and then by priorities you need to subtract your expenses until the money is gone. Now here is the part that confuses some people. Certain categories should NOT exceed over a certain percentage of your income. Housing for instance should be no more than 35%, debt 15%, savings10%, charity/tithe 10%, and other 30%.

You may have several categories that fit your particular family needs. The example in the paragraph above is just a snap short of a general budget. Regardless of which categories you might use most of us will have some basic ones like housing and food.

If for any reason you are having trouble keeping up with your monthly expenses make sure you are paying your bills in this order:

1. Food

2. Housing

3. Utilities

4. Transportation

5. Insurance

6. Clothing

7. Other

Remember if your housing exceeds 35% of your income you must address this discrepancy and if budgeting is still overwhelming seek out professional help. The goal of budgeting is to be able to pay all your expenses, save money and to live within your means.

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