If you’re anything like me, the word “budget” probably makes you break into a cold sweat. I used to be terrible with money; I would spend impulsively and then wonder why I never had any cash left over at the end of the month. But then I learned how to budget, and it completely changed my relationship with money. Now, I know exactly where my money is going each month, and I always have enough to cover my expenses and save for my future goals.
If you’re new to budgeting or you’re not sure where to start, this blog post is for you. Below, I’ve outlined some of my top tips for creating and sticking to a monthly budget. Trust me, once you get the hang of it, budgeting can be easy—and even fun!
Table of Contents
Create an Income and Expense Statement
The first step in creating a budget is understanding your income and expenses. Make a list of all the money you bring in each month (your income) as well as all the money you spend (your expenses).
Be sure to include fixed expenses like rent or mortgage payments, car payments, insurance premiums, etc., as well as variable expenses like groceries, gas, entertainment, etc. Once you have all your income and expenses down on paper (or in a spreadsheet), you can start to see where your money is going each month. This will help you make adjustments to ensure that your spending aligns with your goals and values.
Set Monthly Financial Goals
Once you know how much money you have coming in and going out each month, you can start setting some financial goals. Do you want to save $200 this month? Pay off $50 of credit card debt? Build up an emergency fund?
For an emergency fund, some experts recommend putting away three to six months’ worth of expenses, while others say that’s too much and you should only save enough to cover your essential expenses for a few weeks. So which is it?
There’s no one-size-fits-all answer to this question, as the amount you’ll need to set aside will depend on your individual circumstances. For example, if you have a steady income and don’t have any major expenses (like a mortgage or car payments), you might be able to get by with a smaller emergency fund. On the other hand, if your income is unstable or you have a lot of debt, you’ll need to have a larger fund to cover expenses in case of an emergency.
Emergency funds are incredibly important and should be one of the main priorities when budgeting. Another priority is paying off debt – more specifically, paying off debt with the highest interest rate first (like credit card debt) and then working your way down to debt with lower interest rates (student loans etc.). Whatever your financial goals may be, write it down and make sure it’s specific—this will help keep you accountable. Then, create a plan for how you’re going to reach that goal.
Track Your Progress
Throughout the month, keep track of your progress towards your financial goals. This will help keep you motivated—it’s always satisfying to see how much closer you’re getting to reaching your goal!
App-based budget tracking is one of the most popular methods for people to keep their financial picture in order these days. And it makes sense: using an app to track your budget is easy, efficient, and, often, free. But with so many different apps on the market, how do you know which one is right for you? Here are three of the best budget-tracking apps to help you get a handle on your finances:
- Mint (iOS/Android) is a widely used and well-reviewed budget tracking app. It’s designed to be user-friendly, with an interface that even the most tech-phobic can understand. Plus, it connects to your bank account, so you can see all of your financial information in one place. There’s also a handy “Bills” feature that tracks when your bills are due and sends you reminders so you never miss a payment. Best of all, Mint is free to use.
- Another great budget tracking app is EveryDollar (iOS/Android). It operates on the same principle as Mint: linking to your bank account and giving you a bird’s eye view of your finances. But where EveryDollar shines is in its focus on helping you create and stick to a budget. When you first sign up, you’ll be asked to enter your income and expenses into the app. From there, EveryDollar will help you create a budget that fits your financial picture. And if you find yourself struggling to stick to your budget, there’s also a premium version of the app that offers features like goal setting and accountability coaching.
- You Need a Budget (YNAB) (iOS/Android): The final app on our list is You Need a Budget, or YNAB for short. YNAB takes a different approach to budgeting than Mint or EveryDollar; instead of focusing on tracking your spending, it encourages you to give every dollar a job. That means assigning each dollar you earn to specific expenses, like rent or groceries. This system can be helpful if you find yourself struggling with overspending in certain areas. Plus, YNAB comes with some great features like real-time notification when you overspend in a category and the ability to roll over “unused” money from one month to the next. If you’re looking for a more hands-on approach to budgeting, YNAB is definitely worth checking out.
And if you find that you’re starting to fall behind, don’t be discouraged; just adjust your budget accordingly and keep working towards those goals.
Summary of How to Plan a Monthly Budget
Budgeting doesn’t have to be difficult or boring! By taking some time each month to understand where your money is coming from and where it’s going, you can take control of your finances and reach your financial goals—whatever they may be. So what are you waiting for? Get started today!
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