How to budget money
- Calculate your monthly income, pick a budgeting method and monitor your progress.
- Try the 50/30/20 rule as a simple budgeting framework.
- Allow up to 50% of your income for needs.
- Leave 30% of your income for wants.
- Commit 20% of your income to savings and debt repayment.
Here are some few step to budget
- Use Budgeting Apps
The budgeting app makes budgeting easy. There are apps that can walk you through the process of setting up a budget, then track your progress. Instead of manually evaluating your spending to make sure you stay on track, an app can monitor your spending and deliver the information to you.
- Gather Your Financial Paperwork
Like
- Investment accounts
- Recent utility bills
- W-2s and paystubs]
- Bank statements
You want to have access to any information about your income and expenses. One of the keys to the budget-making process is to create a monthly average. The more information you can dig up, the better.
Use a calendar to catch irregular expenses
While tracking spending shows you where money goes on a day-to-day basis, your budget should also factor in funds for irregular expenses, such as holidays and birthdays.
Americans who borrowed to cover holiday costs took on over $1,000 in new debt during the 2017 season, according to a Magnify Money survey. Half of those who borrowed would still be repaying holiday debt at least three months later. By budgeting throughout the year, you’ll never get into holiday debt again. Some irregular expenses in your budget might include:
- Christmas, Hanukkah, or other gift-giving holidays
- Birthdays
- Annual car inspections and registrations
- Annual vacations
- Property taxes
- Professional dues
- Annual insurance premiums
- Annual medical exams, including veterinary exams
Your calendar and past credit card statements will help you make a list of all expenses that crop up throughout the year.
Create a List of Monthly Expenses
- Mortgage payments or rent
- Insurance
- Groceries
- Utilities
- Entertainment
- Personal care
- Eating out
- Childcare
- Transportation costs
- Travel
Decide how much to save
Once you’ve got your financial goals, decide how much you need to save for each goal. If you want $100,000 for a house down payment in five years, save $1,666 monthly. If you want to build a $1,000 emergency fund by next year, save $83.33 a month. If you want to pay off $5,000 in debt at 10% interest by the end of the year, make $440 in monthly payments.
It can be hard to know how much to save for big goals, like college, a house, or retirement. Check out these guides for help:
The more specific you can be about how much to dedicate to each goal, the more likely you’ll achieve it. But if you don’t want to go through this whole exercise, take a shortcut and make a plan to save at least 20% of your income. You can devote 15% to retirement savings and the rest toward other goals.
