If you’ve ever struggled to manage your budget, first, welcome to the club! You surely aren’t alone. Fortunately, there are plenty of strategies that can help you simplify your budget and make it easier to manage.
It can help, for example, to reverse engineer why you’ve really created a budget in the first place. Overall, it could be because you want to balance your expenses and income so you don’t go any further into debt.
Other budgeting goals often also include paying down that debt, saving and investing so you’ll have more financial security, and gaining the freedom to spend your money in a way that matters to you.
So, if you ever get frustrated by the parameters of your personal budget, it can help to think about those financial goals, how important they are to you, and how you’ll feel as you continue to achieve them.
If you have a family, effectively managing a budget can help to teach other members of your family how to value and manage their own money, so they can prioritize spending and saving in a way that matters most to them.
Financial Wellness State of Mind
You could describe the end goal of managing your budget as getting into and staying in a state of financial wellness. How you’d define “financial wellness” would likely be different from how someone else would, because people value different aspects of monetary-based wellness—and that’s okay.
It seldom hurts to review your budget, to make sure you’ve created the most optimal one possible for your goals. As part of that audit, you could check to see if you’re:
• Only budgeting after-tax income because the rest needs earmarked for your taxes. If you expect a tax refund don’t include that in your budget until it arrives.
• Recording everything you spend. It can be tempting, for example, to round off to the nearest dollar or otherwise estimate expenses, or skip recording small expenditures.
• Checking in with your financial goals regularly so you can adjust them as needed.
• Planning ahead for anticipated holidays and other special events.
• Putting enough aside for you, in the form of savings; if not, where can you trim the fat to make that happen?
• Being consistent with your budget management.
Now, here are personal finance budgeting tips if you’re in college, or in need of a couples’ budget.
Budget Management in College
If you’re a college student, you may be fairly new to budgeting. To help, here’s a list of common expenses you might have:
• Cell phone bill
• Food (not dining out)
• Car maintenance
• Dining out at restaurants
• Greek life or other social organization dues
• Season athletic tickets
• Spring break/other vacations
Are these included in your budget? Is there anything else you should add to your list?
Now, unless you have room in your budget for all of these things (if so, lucky you!), it becomes a matter of prioritization. The first seven bullet points are have-to-pay items, with number eight (car maintenance) also important if you need to drive to work and/or to classes.
After you budget for each of these seven or eight items, how much money is left over in your monthly budget? That can be considered your entertainment or “fun” money—and, if it doesn’t feel as though there’s enough left over for fun, what other budget areas can you tweak to free up some cash?
Can you, for example, rent textbooks instead of buying them? If that doesn’t feel 100% comfortable, can you buy those in your core areas of study and rent the rest? If you look at your food budget, can you trim anything back so you can buy that sports ticket you want or a concert admission fee?
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Budget Management for Couples
A SoFi survey shares how couples often have issues around money, with that same survey indicating that open and honest communication is typically a great way to go.
So, when it comes time to create a couples’ budget, don’t be afraid to talk with your partner about how much money you make, how much you owe, how much of your paycheck you typically spend each month, and how much you save.
Talk about your financial goals. If one of you mostly wants to focus on paying off student loan debt more quickly—but the other one wants more significant wealth building—then you need to talk through these differing goals to create a budget that works for both of you.
As you’re creating a new budget together as a couple, you’ll need to know your combined income and monthly expenses. In general, a good rule of thumb is to divide your income using the 50/30/20 rule:
• 20% in savings
• 50% towards housing, utilities, groceries, and other necessities
• 30% towards eating out, entertainment, and other discretionary spending
This formula can help you to divide up your budget appropriately and to see whether what you’re spending fits within these parameters.
Or, here’s another way to create a couples’ budget. List your combined monthly income, as well as your combined monthly expenses. Ideally, the first is greater than the second, and then you can decide how to use the difference.
You might want to pay debt down more quickly or put money away for a down payment on a house. Or, you might want to add more money to your retirement account or plan a dream vacation.
Also decide how often you’re doing to revisit your budget. Some couples, for example, talk about upcoming expenses once a week. This can be when you also talk about, say, an unexpected bonus and where that money should go.
You can use this time to monitor how closely you’re meeting your financial goals, as well as to decide if you want to adjust your budget in some way.
Once you pay off a bill, such as a personal loan or a credit card bill, you can then decide where the funds you were using to make those payments now fit into your budget.
As part of your planning, it’s generally wise to build an emergency fund that can help you take care of unexpected expenses, or if you become ill, injured or laid off.
You could start with an emergency fund which contains one month’s worth of expenses, and possibly decide to expand that to three months—or six.
How will you factor savings for retirement into your budget? How can you automate bill paying to streamline your processes and help to ensure that a payment never gets missed? How can you prioritize savings by paying yourself first through an automatic transfer? The more you can automate, the simpler management of your money can become.
At the Heart of Budget Management Skills
Tracking and managing what you spend is at the heart of budget management. As you effectively track expenses, you can create a much more targeted and accurate budget, giving you the opportunity to successfully manage what you monitor and reach your goals more efficiently.
When you effectively track spending, you can:
• determine where you’re spending too much
• become inspired to improve your budget, including the elimination or reduction of some expenses
• make it easier to build savings into your plan
• give yourself more freedom to spend money the way you want
As you look to reduce expenses, review items that are both big and small. Larger areas can include:
• buying a car rather than leasing, keeping the total cost of car payments and other maintenance costs to less than 20% of your income
• avoiding mortgage payments that exceed 28% to 36% of your gross monthly income
• paying down “bad” debt with interest over 7% as quickly as you can
Then, of course, there are the smaller items, such as online subscriptions that you don’t use, that extra fancy latte, and so forth. If you find that you spend less on discretionary items when you use cash, then that’s a great discovery.
Use cash. Or, if you discover that you spend less on optional purchases when you use a mobile payment app and can see what you’ve spent, do that.
It could also help to find ways to manage your receipts. That way, you can keep track of what you’re spending, more easily return items, if that’s needed, and have the receipts well organized at tax time. Some people simply find a drawer or box where they store their receipts. If that works for you, then the problem is solved.
There are also digital options, such as Shoeboxed.com . With this service, you can mail your paper receipts to them in a postage-paid envelope and they’ll collect all important data in one place for you to use, as needed.
If there are stray receipts in between mail times, you can scan them using an app, and they’ll be added to your personal dashboard. This service does come with a fee, so you may simply want to use your smartphone to take pictures of receipts and upload them into a central place.
Help From SoFi Money
For spend tracking help you can use SoFi Money®, a cash management account, where you can save, spend, and earn all in one place. You can see your spending on your weekly dashboard within the app to make sure you are staying on top of your budget.
Plus, you’ll earn 0.20% APY on all your cash and get unlimited ATM fee reimbursements around the world (subject to change).
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