When it comes to budgeting, some of us live by the saying, “Out of sight, out of mind.” If you can’t see those charges coming through on your credit card, did they ever really happen?
Only two in five Americans keep a budget or track expenses, but burying your head in the sand can only go on for so long.
At some point, bills will be due, and everything will need to be sorted out. Instead of letting your spending hit you like an avalanche, consider adopting some smart budgeting strategies that take the stress out of spending.
5 Spending Tactics
1. Track Your Spending
For many implementing smart spending strategies, the first instinct is to enact a strict budget. However, it’s hard to get a true sense of what your budget will look like if you’re not familiar with your spending habits.
You could start by excavating last month’s spending using the highlighter method. Print out statements from credit cards, bank accounts, and ATM cards. Armed with an assortment of fun highlighter colors, go through each statement, highlighting by spending category.
There’s no hard and fast rule regarding categories; you might highlight all food expenses one color, or perhaps you want to drill down and dedicate different colors for spending on meals out versus groceries. A simple category breakdown might look like this:
• Household expenses (rent/mortgage, ultities, home insurance)
• Food (groceries, dining out, coffee, etc.)
• Transport (car payments, rideshares, gas, auto insurance, etc.)
• Debt and Monthly Bills (student loans, credit cards, not including home utilities)
Once you’ve gone through and highlighted by category, you can add up the totals for each. While the numbers certainly matter, the visual can be just as helpful.
Are you highlighting credit card statements like crazy with transactions on food? Might be time to reconsider your eating out budget. Is there an Uber charge every other line? Maybe your spending weakness is your daily rideshare habit.
The one thing you shouldn’t feel from this exercise is shame or embarrassment. Most of us over-highlight in at least one category, or overspend when it comes to specific items. Pat yourself on the back for highlighting the issue, and addressing it.
Not one for paper and highlighter? Your bank might provide a similar budget tracking feature online. Or, if you’re looking to see big picture spending all in one place, SoFi Relay® can track all of your spending in one place.
2. Create a Budget
After you see where you typically spend, then you can start moving forward with a budget. Budgets can seem complicated and boring, but what it drills down to is spending less than you make each month—it’s as simple as that.
While tracking is about examining what you’ve already spent, budgeting is about looking forward to what you will spend. And just like no two people are the same, neither are budgets. Here are a couple of jumping-off points. Try one out, or mix and match a few to find the perfect fit for you.
The 50/30/20 rule breaks down your after-tax income into three buckets:
• 50% on needs
• 30% on wants
• 20% on savings
Needs are defined as things you must pay, as well as items necessary for survival, such as:
• Rent or mortgage
• Car payments
It also includes minimum debt payments.
Wants are things you spend money on that are nonessential like dining out or entertainment activities. This includes the “upgrade cost” of things.
For example, you might pay for super fast internet or more data on your phone plan. Beyond the bare minimum pricing, these charges fall into the wants category.
Finally comes savings. This 20% can be divided among a few different accounts, including retirement, emergency funds, and investing. While minimum debt repayments fall under needs, anything above and beyond that monthly charge can be taken from savings.
While it’s not for everyone, the 50/30/20 rule can be a good introduction to budgeting.
Ready for a Better Banking Experience?
Open a SoFi Checking and Savings Account and start earning 1% APY on your cash!
Zero-based budgeting is less about percentages, and more about the big goose-egg: zero. Each month, you’ll want your expenses to match your income, essentially leaving nothing left over by the end of the month. Each dollar will be assigned a job as it comes in. Bottom line, if you make $4,000 a month, your expenses should add up to $4,000 a month.
Sounds simple, right? It can be, with a little practice. After tracking your monthly income, you’ll need to take note of your monthly, then seasonal or annual expenses.
Seasonal planning is essential in zero-based budgeting, you’ll want to plan ahead for these expenses and allocate a little to it every month. Once you have your income and costs down, you’ll subtract the later from the earlier.
If this doesn’t add up to zero right off the bat, you’ll need to balance your budget. That might mean taking a look at your expenses and cutting a few line items.
Now, a word of warning. Just because the concept is called zero-based budgeting doesn’t mean you’ll want to end each month with zero dollars in your bank account.
Instead, you should have zero left to budget—meaning if there’s a month sitting in your checking account, it has a job. That could mean it’ll be spent in a few months, or it’s simply getting transferred over to savings.
Budgeting Apps and Online Tools
For the tech savvy, pen, paper, and spreadsheets might not do the trick. If you’re looking for a way to passively track your dollars and have access to your budget at the swipe of a finger, you might want to use an app to track your budget.
With online tools like SoFi Relay, you can track all of your spending across accounts, as well as set goals for saving. Instead of logging into each account, you can see your charges and debts all in one place.
3. Find the Fun in Saving
Once you’ve started tracking your expenses and budgeting your income, staring at your monthly statements shouldn’t be scary. Instead, find enjoyable ways to maintain your budget and break bad habits around spending.
4. Turn it into a Game
Shoot for a no-spend day once a week, or see how far you can get in your day without spending anything. This doesn’t mean you can’t leave the house, but it will challenge you to find creative ways to enjoy yourself, without pulling out your wallet.
That might mean hosting a pantry leftovers potluck with friends, where everyone brings something from home. Or, it could mean turning to a local library to check out movies, games, or magazines for entertainment. No-spend days will make you reconsider each purchase you make which could help you save a little money.
5. Finding a Partner in Crime
While we tend to be hush-hush about spending habits, getting an accountability partner can help you spend smarter. Maybe it’s someone you check in with a few times a month, or maybe you share budgeting tips, but bringing your spending habits into the open can make it easier to stick to them.
Plus, cluing in a close pal on your smart saving can help reduce that dreaded sense of FOMO you might get when you miss out on spending opportunities.
Spend Smart, Save Smarter
Getting spending under control can bring peace of mind to your pocketbook, but it also makes it easier to save or pay down debt.
Looking for more ways to save smart? SoFi Checking and Savings® is a checking and savings account that has no account fees (subject to change). Plus, withdrawing cash is fee-free at 55,000+ ATMs worldwide to help make smart spending even easier.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2022 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
SoFi Money® is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member
FINRA / SIPC . SoFi Securities LLC is an affiliate of SoFi Bank, N.A. SoFi Money Debit Card issued by The Bancorp Bank.
SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
SoFi members with direct deposit can earn up to 1.50% annual percentage yield (APY) interest on all account balances in their Checking and Savings accounts (including Vaults). Members without direct deposit will earn 0.90% APY on all account balances in Checking and Savings (including Vaults). Interest rates are variable and subject to change at any time. Rate of 1.50% APY is current as of 06/28/2022. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet