Think of Your Budget As a Circle Rather Than a List to Be More Flexible
When you’re budgeting , you probably start with a list. However, your budget is more like a pie chart. You can only set aside a certain amount of money for specific tasks, so it helps to think about it that way.
As the personal finance site Step Up Your Money points out, using a pie chart as the basis for your budget makes much more sense than using a list of numbers. Pie charts are necessarily based on percentages, not specific numbers. For example, a fixed rental price may vary from area to area, but no more than 28-30% of your budget is a good guideline. When you start thinking of your budget line items as percentages rather than specific numbers, you can gain some new flexibility:
If you view your budget as a circle rather than a line, then you won’t need to feel the squeeze when you need to re-insert a new old position. Releasing the compression also takes the pressure off you. You don’t need to feel like you have retreated. Instead, you may feel like you have the ability to deal with the situation – which is the first and foremost goal of budgeting.
If your savings tier represents a set percentage of your income, you can change goals without breaking your budget. Maybe you need to rebuild your emergency fund this month, but set aside some for next month’s retirement. Everything comes from the same goal. While you can reach the same conclusion by manually calculating specific numbers, dividing your budget by percentages helps you make those decisions before you arrive at them.
Are you looking at budgets the wrong way? | Boost Your Money With Rockstar Finance