Introduction
Whether you’ve recently become responsible for managing your finances or you’ve been doing it for years, you should consider using a budget as one way to track your financial health. While budgeting can seem intimidating for a variety of reasons, it doesn’t have to be. Budgeting is not just about numbers or restricting your spending, but rather how you can change your behavior in order to reach your goals. When you focus on achieving your goals, the time you spend budgeting will feel worth your effort.
What is Budgeting?
A budget is a tool for managing your income, expenses and other financial goals like savings and debt payments. Budgets usually cover a set period of time, such as a month or year. Budgeting can involve making a list of expenses or just focusing on a few categories — like grocery spending or shopping. Some people prefer to write their budget out by hand, while others use a spreadsheet or an app.
Monthly Budget Strategies and Tips
When trying to decide what budgeting style is best for you, it’s important to pick one that you can stick to, as it can be easy to get discouraged when obstacles arise; such as emotional spending or inconsistent tracking. Let’s take a look at some popular budgeting strategies.
50/30/20 budget method
With this method, you break your income into 3 categories. 50% for needs, 30% for wants, and 20% for savings. Needs are the essential expenses that you absolutely have to pay, like rent, mortgage, car payments, groceries, insurance, and utilities. Wants are non-essential expenses like streaming services, restaurants, etc. The remaining 20% can then go to savings. This method is helpful in bringing awareness to how and where you spend money, so you can then assess your priorities and determine if there are other opportunities to cut expenses and save more.
Pay yourself first budget
You’ll decide how much you want to save each month. For example, let’s say you want to save 10% of your income. You would set up and automate your account so that every time your paycheck is deposited, 10% will be automatically transferred to the savings account that you choose. The rest is used for expenses or whatever else you’d like. The nice thing about this approach is that it is fairly hands-off, and you don’t have to worry about “doing” anything. Additionally, you can always increase the amount. This method is suited for people looking to increase their savings without investing too much time and energy into budgeting.
Zero-based budget
This method encourages you to use every penny of your monthly income. You allocate all of your money to expenses for needs and wants, as well as short- and long-term savings and debt payments. The goal is that your income minus your expenditures equals zero by the end of the month. This keeps you aware of how much money flows in and out, and can prevent you from spending what you don’t have. Following this method can eat up quite a bit of time and may not be ideal for people with unpredictable income.
The Best Budgeting Apps
Monarch Money is a feature-rich budgeting app that provides a comprehensive overview of your accounts. It allows you to sync bank accounts, credit cards, loans and investments. Choose between two budgeting strategies: flex and category. You can add a household member to the subscription at no extra charge, tag expenses, and set shared savings goals. Monarch also provides a net worth tracker, investment dashboard, personalized reports and reminders of upcoming bills.
YNAB is designed so that users plan ahead for their financial decisions, rather than track past transactions. They follow the zero-based budgeting system, which has you make a plan for every dollar you earn. As soon as you get paid, you tell YNAB how much of your income should go toward various categories, including spending, savings and debt. The idea is that you become more intentional with your money when you’re prompted to actively decide what to do with it.
Rocket Money is a solid option if you’re looking to identify areas of your spending where you can cut back and save. It also allows users to set specific savings goals and automate savings. Rocket Money analyzes your transactions to identify recurring expenses, makes it easy to identify unwanted subscriptions, and will even cancel them on your behalf.
The Best Budgeting Templates for Saving and Tracking Expenses
Budget templates are customizable worksheets that allow you to simply input your income and expenses to get a comprehensive view of your finances. Whether you’re a budgeting beginner or have some experience, a template is always a good idea. Platforms like Google Sheets, Microsoft Excel, and Sheetgo all offer access to a wide variety of free pre-made templates to choose from.
Budgeting tools are designed to help you understand and evaluate your relationship with money. Knowing where you stand and what you want to accomplish can help you find the right fit. Once you know that, the best budget for you is the one that you will stick to.
