Are you part of a two-income couple? If so, one of the easiest ways to create a budget is to live on one person’s income and save all of the other person’s. Let’s say, for example, you and your spouse are both working outside of the home. One of you earns $40,000 per year, and the other earns $60,000 per year. At this point, you are accustomed to living on both of your incomes. To turbo-charge your finances, consider weaning yourself off of that. Take the First Step As your first goal, the two of you should aim to live on the higher of the two incomes. Rather than living on $100,000 a year combined, try living on $60,000 a year. If you can achieve this, you’ve just increased your savings rate substantially. You’re now saving $40,000 annually before taxes. Take It a Step Further If you want to become even more ambitious, try living on the lower of the two incomes. After you become accustomed to living on $60,000 a year, start saving the higher of the two incomes and living on the small
You know that a budget is an incredible tool for reducing your debt and building your savings. But the thought of creating a budget from scratch can be overwhelming. It's possible to start with something simple. The simplest budget, the 80/20 budget, advocates committing 20% of your income to savings and 80% to everything else. Similarly, the 50/30/20 budget as you put 20% into savings, then divides the remaining portion into 50% for needs and 30% for wants. But if you need something a little more specific and structured than that (but don't want to commit to a full budget worksheet), there is a happy medium. The following five-category budget allows you to break down your spending into simple, basic categories, so you can see where your spending should line up and make adjustments if necessary. If you follow this budget, you'll automatically be putting aside a portion of your money to both debt pay-down and savings, helping you reach your financial goals that much sooner.