Tips to Create a Balanced Saving and Spending Budget

Tips to Create a Balanced Saving and Spending Budget

Key Takeaways

    Pay yourself first by allocating 20% of your budget to savings 

    Leverage technology with an app designed to help you customize a budget

    Monitor your spending habits and look for ways to reduce costs

Are you among the many who plan on including budget planning in your list of 2019 New Year’s resolutions? If so, congratulations. If not, there’s still time. 

Budgeting your money is about more than just watching what you spend; it’s also about paying yourself first. This means getting the most out of your money by balancing your current expenses and future goals, while still enjoying your lifestyle. Retirement, for example, may seem to be a long way off, but budgeting today can help you stay on track toward your ideal future.

Here are a few budgeting tips and ideas as you start the new year.

Why Create a Budget?

Budgeting your money can help you plan ahead and get on firm financial footing. Think about all the things you spend your money on in a month. You probably have a general idea of your expenses, but have you ever been left asking, “Where did all my money go?” The 50/20/30 rule is one effective way to gain more financial control over your expenses.

The 50/20/30 Rule

The 50/20/30 rule can help you determine how much to spend and how much to save each month. Suppose your take-home pay (after taxes and 401(k) contributions) is $50,000 annually. That’s $4,166 per month.

    50% toward essentials. That means things you have to pay for in order to live. In general, this includes expenses like housing (rent or mortgage), utility bills, food, and transportation. So, in our example, half of your monthly take-home pay would be around $2,000. 20% toward savings. In our example, 20% of your monthly take-home pay would be around $800. Think of this percentage as your plan to build and maintain your emergency fund, as well as save toward retirement and other long-term goals.30% toward personal expenses. This category includes the miscellaneous expenses that can enhance your lifestyle, such as restaurants, personal shopping, travel, or even your smartphone bill. In our example, your personal expenses allowance would be around $1,200 each month.

Tips to Create a Balanced Saving and Spending Budget

Budget Planner

There are several steps you’ll need to take in order to come up with a budget that works for you and your lifestyle. You’ll need to track your income versus spending, see where your money is going now, and then determine what changes you might make based on the 50/20/30 rule.  

There are a few different ways to track your spending, such as recording your purchases in a notebook or using one of these third party apps on your smartphone. 

There are a Few Third Party Apps to Consider

Mint // A popular budgeting app, Mint combines an all-in-one approach to track your finances, help you make budgets, check your credit, and send alerts right to your phone.

Quicken // Personal finance software with a variety of features that allow you to personalize your approach, whether it’s a general household budget or managing more detailed spending habits.

EveryDollar // This app allows you to create budgets, manage money, track your spending, and split transactions with overviews of your planning, spending, and remaining funds.

Wally // An app that helps you track personal expenses by taking a picture of your receipts instead of requiring you to manually log them.

PocketGuard // This simple app cuts to the chase about what users want to know: how much they have to spend. It provides a snapshot of how much money you can use at any particular moment, given your budget.

Put Your Plan in Motion

It’s easy to talk about budgeting your money, but it takes discipline to follow through on your plans and find the funds to support your spending and saving goals. Here are some initial things you can do to stay on track toward retirement and other goals:

    Spend less and find extra money. Utilities and food are essential, but you can always look for other ways to cut down on lifestyle costs. When you splurge on that occasional indulgence, ask yourself whether you’re getting your money’s worth. If not, consider scaling back. Do you really need that upgrade right now, or can your current model last another year? By making more thoughtful choices and considering all the options, you may find extra room in your budget to save.Automate your payments. This is a great way to pay your bills on time and avoid late payments. By pre-allocating monthly payments, you can better manage your spending and saving, knowing that those funds have been reserved for known expenses.Stay committed. Create a specific goal, such as paying off a debt or funding your retirement. When you have clear ambitions for your financial planning, it can be easier to keep your spending and saving on track. Remind yourself of your goals and the payoff for achieving them.

Plan for tomorrow by setting financial goals today.

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