Whether you’re single by choice or you just haven’t met Mr. or Mrs. Right quite yet, it’s great to organize your finances to the best of your ability. Studies have shown that financial stress has a negative impact on people’s overall health and wellness, and it can even affect productivity at work, according to Reuters. Here are some tips for anyone looking to build a budget for a single person.
Determine Income vs. Expenses
Income and expenses, or positive and negative cash flow, are the basic building blocks of any budget. Determine your after-tax take home pay, then start tracking your spending — something super savers and early retirees told CNBC that they consider a first step to financial freedom. Personal finance experts generally say that tracking where you money goes can be a spending deterrent — and that you can use something as simple as this sample worksheet. You’ll see themes emerge with your spending that could help you ascertain your lifestyle priorities, and from there you can optimize your budget to fit your needs and wants.
Identify Fixed vs. Variable Expenses
Fixed expenses are those that you have every month, regardless of what happens — usually things like rent or a mortgage payment, student loan payments, car payments, or a cable bill. Variable expenses will include groceries and dining, utilities based on usage (like your electricity bill), and credit card payments, if you have any. According to Forbes, one simple, flexible way to budget is to aim for your necessities to total no more than 50 percent of your take-home pay. The next 20 percent you can aim at your big goals, like paying off debt or saving up for a vacation. The rest — 30 percent — is for discretionary expenses, like entertainment or dining out, Forbes writes.
Speaking of discretionary spending: If eating out and traveling are important to you, build this into your budget so that you do not overspend and later wonder why.
Think About & Plan For The Future
It could be that you are currently healthy and love your job. But about 40 percent of Americans — regardless of age and marital status — are woefully underprepared to cover an unexpected bill of even $400, according to a 2018 Federal Reserve report. According to CNBC, the ideal emergency fund has enough cash to cover three to six months of living expenses.
One simple way to optimize your savings? Schedule automatic withdrawals to a savings account, a super saver tells CNBC. Personal finance experts overwhelmingly suggest taking advantage of a company’s 401(k) retirement savings program if it’s offered, too. The contribution is pre-tax, so you won’t miss a thing.