Have you ever wondered why your budget never seems to stretch far enough? Or how you can build a budget that covers all your expenses? Here at D3sconocidos we will give you 3 ideas for creating an unbreakable budget.
What is a budget?
To better understand the concept of an unbreakable budget, we need to know the definition of a budget.
According to the technical definition from Economipedia, a budget is “the amount of money needed to cover a certain number of necessary expenses in order to carry out a project.”
(Economipedia. Definition of budget)
In a sense, many of us think that budgeting just means calculating a number of expenses and covering them. But the truth is that this is only a small part of a real budget. Here are 3 ideas for an unbreakable budget that will help you know how to save money, how to divide it, and how to keep a little aside in case unexpected expenses arise.
- The 70-10-20 Rule
The 70-10-20 rule is a cornerstone of any budget, as it allows you to divide your money into major expenses, a safety fund for unexpected costs or urgent needs, and spending on personal wants (preferences, luxuries, entertainment).
- Know your major expenses
It is extremely important to recognize your major expenses and prioritize them. You cannot put your Amazon Prime monthly fee ahead of your rent or school tuition.
- Emergency fund
Finally, you need to have a financial reserve of a considerable size that can get you out of a pinch — for example, if you are short a certain amount to pay your electricity, water, or gas bill. Keep in mind that you cannot always dip into it; it is only for covering essential expenses. After doing so, you must replenish it by adding 10% of your income.