For some people, budgeting money comes naturally; they like being organized and tracking data. For others, it’s a bit more challenging; facts and figures aren’t their forte. Nevertheless, the process can be made easier with a few quick tricks. Here are four easy techniques that will make your budget planning a breeze. (For more, see Budgeting Basics.)
1. When Budgeting Money, Automate Your Tracking
Today, there is no reason you should need to save receipts in order to track your spending. Banks, computer software and smartphone apps can help you track your budget. These programs often use the same security systems that online banks do, so if you choose a reputable tracker, you should not be concerned with the safety of your information. These programs will not only track your spending; they’ll also help you categorize your purchases, send you alerts when you are nearing your budget limits and help you set long-term financial goals. (For more, see 4 Best Personal Finance Apps.)
2. Automate Your Spending
Automation helps you track your spending and can also make paying bills and sticking to your financial goals easier. Automatic bill payment and automatically moving money into a savings account can take some of the difficulty out of sticking to a budget. After all, if you never see the money in your checking account, you won’t spend it on things not in your budget. Just be sure that you have enough funds to cover your automated expenses, so that you aren’t hit with overdraft fees.
One way to avoid this risk is to set all automatic withdrawals to hit at the same time that your paycheck comes in, so your money goes directly toward your bills and goals at a time when you know you will have sufficient funds in your account. Some employers will even direct deposit a designated amount into a savings account each pay period while putting the balance into a checking account.
3. Be Flexible
Being flexible with a budget is not just about being flexible with money; it is also about being mentally dexterous. Life is unpredictable, and sometimes expenses that you hadn’t foreseen come up, causing you to overspend. It's important to recognize that a budget is a tool that can and should be adjusted if it isn’t aligning with your spending.
If you go over budget a few times, don’t beat yourself up. Instead, plan for a slightly larger emergency fund as a cushion. (For more, see: Building an Emergency Fund.) However, if you continually go over, then it’s time to reassess either your expectations (if you aren’t going into debt) or your spending (if you are paying out more than you can afford).
4. Consider Your Future as a Necessity
Most people understand the difference between “wants” and “needs” when it comes to budgeting. However, many people incorrectly place savings in the “optional spending” category. Saving for retirement, an emergency fund and long-term goals is critical for financial health and should not be considered an optional expense.
Even if it means forgoing dinner out or cutting cable, saving money needs to be a mandatory part of your budget. It will increase your ability to be flexible about expenses and ensure that you are financially prepared to meet your long-term goals, whether you want to buy a house, travel the world or pay off debts.
The Bottom Line
Budgeting money is critical for everyone, but to be successful at creating and sticking to a plan, it’s helpful to have some tricks up your sleeve. These four easy techniques should help you become a budget expert in no time. (For more, see The Beauty of Budgeting.)