Budgeting your money is a free, easy way to manage your finances. But, sticking to a budget can be a lot like sticking to your New Year’s resolution. It is easy to start, but just as easy to quit if the follow-through takes too much time.
Tracking your spending is an important part of budgeting, but it is also tedious. It requires keeping a record of your purchases and actually remembering to record each transaction. Keeping up with where your money goes by tracking every single dollar spent is time-consuming and who really has time? In an already busy world, how can we make budgeting easy without having it be a daily task to add to our list?
The key is to make a budget that allows you to manage your money in the simplest way possible. A simple spending plan offers the flexibility to spend your money the way you want to – without feeling restricted. It allows you to pay your bills and know that every remaining dollar is yours to spend as you please. Simply put, a straight-forward spending plan will help you manage your finances stress-free. You can save money, meet your financial obligations on time, and have the freedom to spend your money without constantly having to refer to a strict budget. Easily budget your money and stick to it by following these four steps.
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The steps are listed
Step 1: Know how much comes in and how much needs to go out.
Your starting point for building your spending plan is knowing how much money you have to spend. To do this, calculate how much money is left after all the fixed monthly expenses, or bills, are paid. In considering how much money you bring in each month, remember to look at your take-home pay, that is, what your actual paycheck is after taxes, insurance, retirement, etc. have been taken out. Subtract your bills from your take-home pay to find out what your monthly spending allowance is. This will be the amount of money you have to spend on whatever you want each month.
While some of your fixed monthly expenses are truly fixed amounts, others based on usage like your water or electric bills may fluctuate. To properly budget for these changing amounts, review your bills for the last several months and see how much the amount changes from month-to-month. A safe bet is to take the highest amount from the bills you reviewed, and round it up to the nearest ten-dollar. For example, if your median amount is $123.50, you could round up to $130 and use that as the anticipated amount for the fixed monthly expense. This will likely give you a bit of a cushion in the event of an amount higher than expected.
It is important to prioritize your bills. By accurately accounting for each bill, you will have the assurance of knowing that you will always have money to cover your necessities first, leaving only the remaining money for non-essential purchases.
Now, if subtracting your expenses from your take-home pay leaves only a nominal amount for your spending allowance, don’t panic. Rather than focusing on cutting back on your food budget, explore realistic options. Do you have any fixed monthly expenses you can cut back on, like lowering your cable package one tier or canceling your Spotify subscription? If none of your bills can be reduced, consider ways you can increase your income. Explore side-hustle options like working a few hours a month for a driving or meal-delivery service for some extra money.
Step 2: Enroll in automatic bill pay for everything you possibly can.
By enrolling in automatic bill pay, you not only protect yourself from racking up extra expenses for late fees when you miss a payment, but you also take some responsibility off your plate. Now, you don’t have to worry about due dates and you don’t have to lose sleep over wondering if a bill got paid or not. Automatic bill pay is an easy way to guarantee that your monthly expenses are paid in a timely manner. It might even save you some money! Many companies offer discounts and other incentives to those customers who are enrolled in automatic bill pay, so it is a great way to have peace of mind that your bills have been paid and it might put some money back in your pocket over time.
Step 3: Automate – Let technology track your spending for you.
Tracking your spending is an important part of budgeting but it takes time and discipline to be consistent. Consider using a single card for all your purchases. Most card providers offer instant transaction accounting online or through an app. By using a single card for all your purchases, your spending will be tracked automatically in your transaction history. This will provide a central location to manage your spending. Every purchase is logged automatically, so you don’t have to remember to do it manually.
Some card providers, whether it is your bank for a debit card or a credit card company, may even offer extra features to help you manage your spending. For instance, some providers will categorize purchases for you so that you can easily track your spending habits. Others have daily spending limits you can set up that will send you a text or notification through an app on your phone to help you stay on track.
If you are someone who has a tendency to spend money you don’t have when using a credit card or if you prefer to use cash over a debit card, there are still options available to make tracking your spending less tedious. Find a personal finance management tool that works for you. There are plenty of apps out there that you can download to your phone to help with this.
Looking for a way to increase your spending allowance, but not interested in picking up more work? Some credit card providers offer great cashback rewards and savings. You may consider using your credit card for all your purchases – of course, paying off the balance each month because you only spend what you have budgeted for in your spending allowance – to earn extra savings or cash.
Step 4: Use a spending allowance to buy the things you want!
Allow yourself to spend your money – worry free! A spending plan helps you manage your money by making sure your bills are paid first, and that the money you have left to spend is truly disposable income. By following this plan and using your spending allowance to cover any non-essential purchases, you eliminate the stress of wondering what you can afford, if the bills have all been paid, and the anxiety of unplanned expenses that you can’t afford. Your spending allowance is your money to spend the way you want to spend it. Now, go spend it and enjoy!