Taking a look at your household’s monthly budget at least once a year is a smart habit to get into. This practice will help you balance income and expenses while allocating money for specific financial goals, such as a paying off debt or saving for a family vacation. Consider the following budgeting methods that have proved to be popular when creating a budget to help you get started:
- Zero-Based Budgeting: Allocate every incoming dollar to a spending or saving category. The categories may cover current expenses or anticipated future expenses, like an emergency fund or holiday gifts.
- The Balanced Money Formula: Break down your spending into three categories: fixed costs, financial goals and flexible spending. The categories should equate to no more than 50 percent, 20 percent and 30 percent of your monthly income, respectively.
Pick the method above that seems best for achieving your budgeting goals, then follow these tips to begin creating your budget:
- Track all expenses for one month. Once you identify where your money is going, you can adjust your budget categories and future spending.
- Set financial goals. Whether you want to pay down debt, save for retirement or take a vacation, goals will help keep you accountable.
- Review and adjust as needed. Sometimes, income and expenses can vary from one month to the next, so it’s important that you regularly review your budget to see if your allocated amounts are too high or low.
- Use a budgeting tool. There are tons of apps available to help you manage your money including Mint, Sig Fig, Manilla and Credit Karma. These tools are aimed at simplifying budgeting tasks to help you stick with it and achieve your financial objectives.