Budgeting has earned a bad reputation somewhere along the line, but it can help brighten your overall financial picture so much if it’s done right. If you think about a budget in the terms that it simply exists to help you manage cash flows, you can begin to understand why a good budget is important. Contrary to popular belief, it takes hardly any effort to create a useful budget that can guide you through times of financial highs and lows. Have you been dying to have your top budgeting questions answered? Read on and get the answers to the top budgeting questions out there!
- How much should get set aside for investing? This is one of those great top budgeting questions. When trying to figure out just how much money you should dedicate to investments, you age, disposable income and liquidity needs all come into play. You age might be the most important factor especially if you’re nearing retirement: if you’re trying to save up for a house to retire to, you’ll probably want to be setting aside a little more than usual for this very purpose. Disposable income refers to the money that you have available to “play” with. Depending on your need, you can decide to spend that money now on fun things, or you can decide to save it to have later when you might really need it. Liquidity basically refers to how quickly you can convert assets into cash. Your liquidity level determines the kind of interest rates you will most likely receive. There is no set number for how much you need to put away, but it’s safe to say that at least five to ten percent of your net income should be heading to the savings account or into investing.
- How much money should I put aside for debts like credit cards and car loans? This as well is another one of those crucial top budgeting questions. You still want to be able to have an enjoyable life even if you have annoying debts to pay down, and the best way to do that is by handling your debts first. You should not be setting money aside for investing if you have existing credit card balances. Some debt, like car loans, are on a pretty strict repayment schedule and they have to be paid on at certain times. Credit cards can generally be paid down when one has the means to address the bills.
- Should I overpay on my mortgage if I’m able to? Some fixed-loan payments allow for overpayment while others don’t. Crunch some numbers regarding interest rates to see if it’s really the best idea to overpay on a fixed debt. If you’ve got a conventional loan, it’s probably highly likely that your mortgage is the very least expensive of all the debt you’re paying off, but it could still make sense to overpay it. Firstly though, you want to be sure that all of your higher interest debts have been settled. Any money that you plan to overpay your mortgage with should be money that was otherwise going into the savings or investment accounts. If you’re working with a fairly decent interest rate on your mortgage, in most cases you might as well spread the overpayment money around on some of your more pressing debts.
- How should I update and maintain my budget to keep it relevant? This might be the most important of the top budgeting questions out there. In the first few months that you’re working with a budget, you’ll have to make sure you’re reviewing all of your statements thoroughly to see where and how your money was spent. You compare the figures and adjust amounts to be sure that your output doesn’t exceed your budget’s bottom line. This makes it simple to quickly and efficiently update and maintain your budget at any time to keep things organized and relevant.
- Why do I always have extra wants and expenses that just don’t fit into my budget? And we arrive at our last of the most important top budgeting questions. One of the main reasons why many people don’t even bother creating a budget is because there are always other expenses that never fit in. There’s an easy fix for that! Work a “miscellaneous” category into your budget and you can file those wants and extra expenses there. You can always re-evaluate and change your budget’s bottom line or categories where you might have predicted more spending than necessary. Over time, the longer you use your budget the more you will see how closely reflective it is of your actual spending habits.
Creating a good budget may seem like an incomprehensible issue to many people, but it can be accomplished with just a little hard work and discipline. Keep these top budgeting questions in mind as you seriously think about all of your expenses!