Do you want to lessen the strain of having to manage a budget? You can start the year off right by streamlining your finances and budget. By looking at some ways to streamline your budget, let’s try to lessen some of that stress today.
Simplicity does not imply poverty or being stingy. Making sure your hard-earned money is being used for worthwhile and significant endeavors is what it means to be frugal in the best sense of the word.
Categorize Your Expenses
One of the biggest issues that financial blogger Donna Freedman encounters when working with clients who are managing their personal finances is not knowing where their money is going. You might become aware that you’re consistently going over budget as a result, which can be stressful.
“When you know you have enough money to deal with all of your needs and some of your wants — plus those pesky emergencies — you can sleep very well at night,” Freedman says.
Do a rough calculation of your monthly spending on things like rent or a mortgage, insurance, gas, and car upkeep, groceries, phone and internet, utilities, and other living costs. When you’re finished, you’ll be able to clearly see how you spend your money each month. This will take a little while as you go through debt and credit card purchases and try to remember cash expenses.
Update your expenses once a month or every three months by keeping a spreadsheet of this information. The third tool below makes it even simpler to manage by quickly calculating the percentage of income for each category.
Simplify Your Tools
You don’t need a comprehensive app with intricate reporting and perplexing features if you’re maintaining a straightforward cash-in, cash-out budget. It will be useless because you won’t use it because you’ll put your budget on hold if you can’t figure it out or understand it. Instead, use one of these simple tools:
Simple Budgeting Calculator: Money in and money out are the only two discrete inputs needed for this straightforward calculator. When you enter something, you’ll receive a dollar figure representing your total debt or savings, along with the percentage you spent or saved. This calculator can be used to set a goal and determine whether you achieve it each month.
Monthly Budget Calculator: Use this budget to review your monthly expenses—there are sections for everything from rent to car payments—and to get suggestions on how to make it better. This is a fantastic option if you’re looking for a step up from the basic calculator above.
Monthly Budget Planner: This online budget planner goes one step further by displaying the percentage of your income that is allocated to each type of spending. You’ll also receive totals for your monthly income, expenses, and income-less expenses. With the aid of this information, you can fine-tune your spending and saving plans and discover areas where you could cut costs.
Wallet: This is a step up, but it’s still a great tool for those looking to streamline their budgeting. Simply begin by including budget categories and associated dollar amounts. As you become more comfortable using the app, you can advance to setting financial objectives, importing accounts, experimenting with your budget forecast, and much more.
Reduce Your Number of Open Bank Accounts
You’ll stay more organized and in control of your spending if you keep the number of active accounts you have to a maximum of four. Although it’s crucial to diversify your holdings, you shouldn’t spread yourself too thin.
Make an effort to combine your checking, savings, emergency, and investment accounts into one. Money management may be more effective when using a minimalistic style. Close any old accounts you might have with a bank from your college or hometown if you only use one bank currently.
If the interest rates are favorable, transfer as many loans as you can to your bank as well to make managing their repayment easier.
Keep in mind that organizing your accounts goes beyond just making management simpler. Fewer accounts open leaves you less vulnerable to attacks that could damage your credit: “The fewer open accounts you have, the less risk you’ll encounter for identity theft and deposit, transfer or overdrawn fees,” says Financial reporter Marcie Geffner.
Manage Cash With the “Envelope System”
Cash purchases prevent overspending because it’s far too simple to use your credit card, especially when you’re out with your significant other or friends, and this throws your budget out of balance.
Give yourself a weekly spending allowance and take it out of the bank every Sunday night if you want to stop using credit cards completely. If you run out, the next Sunday is the last day to get more money. If you can keep yourself to this, you’ll start giving every purchase serious consideration.
Choose a few areas where you frequently overspend and use cash there if you don’t want to go completely cashless. For example, this would be good for “play money,” like when going out with friends or on vacation. Put the funds allotted for each into distinct envelopes that you can take with you when you leave the house.
Both approaches reduce your likelihood of making impulsive purchases while you’re out and about. Any leftovers should be saved, or you should treat yourself to something enjoyable. You’ll continue to budget if it’s rewarding for you.
Minimize Credit Cards
Having a credit card has many advantages, such as earning travel miles and the convenience of having cash on hand. As you max out one, you move on to the next, but having too many can quickly result in overspending. Before you know it, you’re saddled with high-interest payments and owe more money than you’re earning. That is probably the main factor contributing to the $818 billion total credit card debt in the US at the moment.
Despite the fact that the modern economy frequently relies on credit, giving it up will ultimately save you time, trouble, and money. Limit the number of credit cards you use; ideally, use no more than one or two. You can think about getting more credit cards as needed once you have your monthly payments and spending under control.
Close Note
It can be intimidating to take control of your finances, but once you get into the habit of budgeting each month, you’ll develop the confidence to start setting goals and making plans for investments and security in the future. Never forget: It doesn’t have to be difficult. Budgeting success can be facilitated by knowing how much money is coming in and going out, as well as where it is going.