Smart Budgeting – How does it Work?

Are you tired of going over budget, but don’t know how to stop? You aren’t alone. 

Millions of people either don’t know how to budget, think it’s too restricting or constantly go over their budget and can’t seem to fix it, making them forget budgeting altogether.

Does this sound like you? It’s time to change things – it’s not as hard as you think!

How to Control Spending?

You love spending, right? 

We all do, but we have to know when and when not to spend. It sounds restricting or hard – but with practice, it gets easier!

First, you must know how much you bring in and how much goes out. If you aren’t sure what you spend, pull your bank statements from the last few months. 

Do you find that you spend more than you realize? Until you write it down or enter it into a program, you won’t know. Always start with this step.

List out your expenses in categories. You’ll find that you have ‘necessary’ expenses and ‘unnecessary’ expenses. The non-negotiable expenses are those you must pay, such as:

  • Rent or mortgage payments
  • Utilities
  • Food (groceries)
  • Insurance
  • Car payments

Unnecessary expenses are expenses that go above and beyond what is necessary for the basic living needs that you may live without or be able to sacrifice. For example, you need food, but dining out isn’t a ‘necessity.’ You also need clothes, but don’t need designer clothing. 

Don’t worry, you don’t need to sacrifice, but you should pay close attention to the ‘extra’ spending if you always go over budget.

We love using the 50/30/20 budget. With this method, you allocate 50 percent of your income for the non-negotiable expenses, 30 percent for ‘fun’ or ‘unnecessary’ expenses, and 20 percent for savings and/or debt payoff.

Knowing you have some freedom within your budget alleviates the ‘restricted’ feeling many people have when they create a budget.

Know your Due Dates

Do you often miss your bill due dates? Did you know you’re likely throwing money out the window with unnecessary late fees and excessive interest?

Smart budgeting starts with ending these unnecessary expenses. 

Try using a bill reminder app that makes it impossible to miss your due dates. TimelyBills sends you reminders of your upcoming bills including the amount due, the date, and ways to pay. It’s a wonderful way to stay on track even on your busiest days.

Set yourself up on a schedule so you avoid late fees and/or can see any overdue or unpaid amounts that need your immediate attention.

Pick your Favorite Budget Program

We mentioned the 50/30/20 budget already. It’s one of the easiest budgets to adapt to and one of the least restrictive. But, if you need something more structured, a few other options include:

  • Envelope budget – Create budgets for each category you spend money in, such as housing, food, clothing, utilities, debt payoff, saving, etc. Put cash in each envelope (or create digital accounts) and track your spending in each category. Once you spend the allotted amount, you can’t spend in that category again until the next month.

  • Zero-based budget – This budget gives every dollar a ‘job.’ The idea is to live off of last month’s income and not rely on what’s coming in. This helps alleviate financial stress, knowing you have every bill paid. You need great attention to detail with this method as you must assign every dollar you bring in a ‘job’ whether it’s to pay a bill, go into your savings account, or help cover your ‘unnecessary expenses.’

Try a few budget methods if you aren’t sure. There isn’t a budget you MUST use or any right or wrong answers – you do what’s right for you.

Set up Overspending Alerts

No matter the budget you choose, know when you overspend. Whether you keep track with pencil and paper or you use an app like TimelyBills that alerts you when you overspend in a category.

You set the limits and the app alerts you when you’ve gone over. If you quickly readjust, you’ll avoid the domino effect that usually happens once you overspend in one category. Being aware of your mistakes helps you pick up the pieces and move forward, making better choices.

Stay Aware of Budgeted vs Spent Amounts

This is the key to staying within your budget. At a glance, you need to know when you’re nearing your budgeted amount. 

If you make this too hard, you won’t do it. Going back through your bank statements may help, but it’s time-consuming and we all know it’s not always effective. Instead, use an app that helps you see quickly how much you’ve spent and how much you have left.

Now when you’re about to make a purchase, you can look and see if you have enough. This eliminates the risk of overspending and encourages smarter financial decisions.

Anyone can Budget – Even You!

Budgeting isn’t as hard as it seems. We all make it more stressful than it sounds. With the help of a friendly app, you can have your budget, bill reminders, reports, and alerts at your fingertips. If you own a smartphone, there’s no reason to avoid budgeting.

As you move through the process remember:

  • Be flexible – No one is perfect. You will make mistakes. Learn from them, re-budget if you must, and move forward.
  • Play around with different budgeting plans. If you choose a plan that doesn’t work for you, try something else, don’t give up budgeting altogether.
  • Listen to your alerts – If you find yourself panicking each time you get a bill payment alert, it’s time to revisit your budget and try something different.
  • Always make room for savings – No matter your budget, if you live paycheck-to-paycheck, or if you’ve never saved in your life, always include savings in your budget, even if only a few dollars.

Budgeting takes time, patience, and technology. Why reinvent the wheel when you can have your budget, alerts, and important financial information handled for you? Make budgeting as simple as possible and you’re more likely to stick to it, increasing your savings, setting yourself up for retirement, and staying out of debt!

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