How to Balance Your Budget

The discourse surrounding the term “budgeting” seems to have turned sour. People equate good budgeting to sucking the fun out of everything because you can’t spend money on anything you want. This isn’t the purpose of budgeting, but exactly the opposite: it’s a way to help you become financially secure and stable so you can afford the frivolities you want, while still paying for necessities, avoiding huge debt, and having a safety net in case of unexpected expenses.

It’s fairly simple to balance your budget, as long as you understand the basic requirements. Here are the ways you can track your spending and balance your budget.

Create a budget

The first step to balancing your budget—obviously—is to establish what your budget is. Before organizing your spending habits, you first need to calculate your income after all taxes are deducted. Once you understand exactly how much take-home pay you have to work with, you can start limiting your spending and budgeting properly.

Create a list of all the sources of your monthly income including your take-home pay, any bonuses or tips received, or monthly payments like child support, and add up how much each one is. This is your monthly income, which you will compare against your monthly expenses. Add up all your bills, housing payments like rent or mortgage payments, expenses like groceries, gas, or other transportation costs, and any extra extraneous expenses like gym memberships or recreational classes. The goal is to make sure your expenses total to less than your income, and if they don’t, you need to make some budgetary cuts.

Choose a budgeting method

There are a few different ways to budget, but the most effective way is with the 50/30/20 rule. The 50/30/20 rule is a fairly new and popular way of managing your finances and tracking your monthly spends. It categorizes your spending into three groups: Needs, Wants, and Savings.

Needs: 50% of your income should be spent on things you need, like groceries, housing, utilities, health insurance, and car payments. See where you can save money here. If some expenses are set in stone, like your rent or mortgage payments, try and cut costs in other places. Shop at cheaper grocery stores, or buy in bulk to save, for example.

Wants: 30% of your income can go towards things you want, like dining out, going shopping for new clothes, or spending on hobbies or recreational activities. Try and limit yourself here, because it can be tempting to spend frivolously in situations like going out for dinner with friends.

Savings: 20% of your income should be put towards a savings account and debt repayments. It’s a good idea to put your money in a high-yield savings account so you can get a bit more return on your money while it sits safely away.

This method may not be possible for everyone, because everyone’s financial situation is different. If you are unable to follow this rule at the moment, consider it as a goal to work towards in order to improve your financial security in the future.

Use budgeting tools

It’s so much easier to properly track your finances if you have the resources and tools to help you. Sure, a pen and notebook get the job done, but it’s a bit outdated and does require you to be fully on top of everything since you’re manually recording your spending and income. There are several ways of recording your budgeting that will make it easier on you.

  1. Use a spreadsheet. It’s basically the same as a pen and notebook but laid out more comprehensively on your computer. Microsoft Excel has free templates for you to use, so you don’t have to organize it yourself, but instead just have to plug in your numbers and do a bit of math.
  2. Use online software. You can find free web-based programs or spend a bit of money and get a more comprehensive program that does more of the work for you.
  3. Use an app. Again, there are both paid and free options available directly onto your smartphone. These are beneficial if you want your budgeting information at your fingertips all the time. Plus, they can be connected directly to your bank account, so you can see your expenses categorized in real time.

Commit to it

This is the challenging part: you have to now commit to your new budgetary restrictions. It can be tough to limit your spending, but it must be done to achieve financial stability. There are plenty of ways to save across the board.

If you are thinking about going back to school to further your education but are worried about the cost, think about an online program. There are plenty of reputable schools like Suffolk University Online, which offer online degree, masters, and graduate programs in almost any field of study.

Online courses are usually much more affordable than traditional in-school programs, since tuition is cheaper and you won’t have to pay for expenses like:

  • Student housing
  • Meal plans
  • Transportation
  • Student fees
  • Physical textbooks (PDFs are sometimes a cheaper option)

If you have debt and your interest rates are wreaking havoc on your budget, consider speaking to a financial planner to help consolidate your debt and create a plan to pay it back that works within your limits.

Perhaps you need to trim the excess from some of your bills, like your cell phone or cable bills, which are notoriously high. Try opting for a cheaper plan with fewer frills, or bundling your phone, cable, and Internet together with one company. If your grocery bill is over budget, try buying bulk foods and meal prepping for the week, so you’re less tempted to order delivery or go out for dinner.

Use comparison websites to save money on insurance, utilities, and other services by quickly comparing quotes and prices against your current provider’s competition. Most of these websites are free to use and can help you ensure you’re getting the most bang for your buck and not being ripped off.

Budgeting can be tedious and somewhat of an exhausting process at first, but once you get into the swing of things, it becomes autonomous and second nature. The benefits of budgeting certainly outweigh the effort it takes to do, especially when you end up with financial stability. Get ahead of your finances and take a proactive approach to control your wealth.

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