Would you be alarmed to hear that 44% of the American population is not only living paycheck to paycheck, but they’re also doing so without a proper budget? While the easiest path to financial success is through formal education to increase financial literacy and learn basic budgeting principles, minority groups don’t often have that luxury.
Sure, you can follow financial gurus focused on teaching you the tips you need to reach financial success, or even participate in forums and veteran groups where you’ll learn the skills you need. However, it shouldn’t have to be that hard. Monthly budgeting tips should be accessible to all. That’s why we’re here.
If you never learned how to create a simple budget, what types of things to budget for, or even what a budget looks like, don’t worry. We’ve got a few helpful monthly budgeting tips that’ll guide you towards the path of financial success. And, you don’t need to pay or work hard to use or implement them.
5 Monthly Budgeting Tips Made Easy
1. Set Realistic, Achievable Goals
One of the quickest ways to fail when developing a simple budget is to either miscalculate your living expenses or to set unrealistic goals. You likely have a decent idea of roughly how much you earn and how much you spend each week. If you know that you’re usually only able to save $500 per month, don’t set a budgeting goal with the aim of saving $5,000 per month.
Work within your current reality instead. If you’re the type of person who thrives on small wins and success, setting smaller, more actionable goals is the way to go (starting embarrassingly small is actually a great way to go about anything you want to be successful at, according to some).
2. Think About the 50-30-20 Rule
The 50-30-20 rule was made popular by Elizabeth Warren and is now widely used as a great benchmark for any household budget. You take your post-tax income, and you use 50% of it to pay for your necessities, 30% of it for things you want, and put 20% back into savings. In this example, a necessity would be your mortgage or rent payment, a want would be an accessory for your camera you use in your free time, and savings would be putting back $100 straight into your savings account.
Or, you can also think about following the 70-20-10 rule where you use 70% of your income to pay for expenses, save 20% of it, and invest the other 10%. Regardless of which one you choose to implement, the goal is to get you thinking about your expenses and spending habits. Once you do, you’ll likely find areas where you can cut back on spending.
3. Find a Budgeting Method That Works for You
It’s hard to make budgeting easy if you’re not into the way you’re budgeting. Lucky for you, various budgeting methods exist. Find the one that works best for you and stick to it! This could be:
- Zero-Based Budgeting: With zero-based budgeting, you plan for every dollar that you earn. This leaves no money leftover at the end of each monthly budget, whether it’s allocated towards groceries, clothes, or your savings account.
- Sub-Savings Budgeting: If your goal is to save more money each month, try the sub-savings method. It requires you to open separate savings accounts with names specific to their goals. This could be “emergency fund,” “Aruba trip,” or even “grocery fund” to help you budget for the year ahead.
4. Know What Things to Include in a Monthly Budget
If nobody taught you about finances, then it’s going to feel overwhelming to figure out what things to budget for each month. Sure, you know that you have to budget for the essentials such as rent, groceries, and car insurance. But what else?
Here, it helps to get a handle on the difference between fixed expenses vs. variable expenses. Fixed expenses remain the same for some time, such as rent, car payments, and even certain subscription payments (gym, Netflix, etc.). They’re the same each month. Variable expenses are expenses that, well, vary. This includes your utility bills, groceries, and any discretionary spending on things like entertainment and food.
To effectively budget for variable expenses, we’d suggest first starting with a monthly budget template. You’ll notice that there is an area for expenses, with categories such as transportation, food, housing, and more. Use these spaces to calculate your variable expenses. Once you have a few months of information on how much you spend on average for these, it’s helpful to budget at least that amount each month for variable expenses plus 10% for any unexpected emergencies. Download the form and fill it out as it relates to your personal finances.
5. Track Your Spending
Budgeting forces you to track your spending, at least if you’re doing it right. Don’t just set a budget and rework your finances at the end of each month to see where you’re at. Actively track your spending each week. To do this, it’s helpful to use an app that’ll not only help you track your spending but also engage in other financial tasks. Check out our guide to the best budgeting apps of 2021 for details on the apps we love.
However, it’s not just about monthly budgeting and managing spending. Monitoring your credit score, accessing personal loans, and browsing insurance products are all a part of improving your financial future. When done alongside budgeting, you’re able to get an even more comprehensive overview of your current financial situation.
At WealthStack, we’re offering the chance to do just that. We’re an all-in-one financial platform where you can access information specific to your budgeting, spending, and overall financial goals. The catch? There is none. All you have to do is sign up and start accessing free tools and courses.
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