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Principles Behind Frugal Budget

Updated on January 8, 2015

Principles of Good Budget

Education on how to use your hard- earned cash is very important for the realization of your long term goals - like having a home or car, without bogging you down with a lot information and jargon, I would go right ahead and come up with a framework on how to spend income wisely.

There are few principles that are common to every income earner like:

Paying taxes – At some point you will be required to pay government taxes, if you are not required to pay then you have avoided one of the big expenses.

Giving out to charity – After paying taxes, you need to give out to charity, a minimum of 2.5% of your earning after tax; you can give more depending on your income, you need to give this charity to people close to you who need it – parents, relatives, poor and needy - .

Paying debts – You will need to set aside around 10% of your (income after tax) monthly to pay your outstanding debts.

Savings – You will also need to set aside 10% of your (income after tax) for saving.

Spending (prioritizing expenses) after creating a budget - So far you have spent around 25%-50% of your income, depending on whether you are paying tax or not, the remaining can be enjoyed for the right purposes, first paying off major expenses.

Frugal Living

 
 
Income
50000
 
 
Tax � 30%
15000
Charity -10% of (income after tax)
3500
Other statutory expenses(pensions, medical)
4,000
 
 
Income after Statutory expenses
27,500
 
 
Debt
2750
Savings
2750
 
 
Income after paying off debt and saving
22,000
 
 
Rent
5000
food
8000
Clothes
3,000
Transport
4,000
Airtime
2,000
 
 
Income after fixed costs
0

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