Your Personal Budget Isn’t Working. Here’s an Easy Fix

Time: 10–12 min.

Summary

• Learning how to budget is a critical life skill that can put you on the path to financial success.
• To budget effectively, set clear milestones and be open about your financial goals.
• Budgeting apps can help you better manage your money and understand your financial situation, especially an app like Marygold & Co that also enables you to spend/manage/invest money 💸

The budget squeeze

Feeling squeezed at the end of every month? Paycheck disappearing before your very eyes and leaving you wondering where all your hard-earned money went? Feel like you’re never going to save enough money for your long-term goals?

You need a better approach to budgeting.

Taking a closer look at your personal finances can be a little daunting, and it’s probably not the most fun activity on your to-do list. But no matter what kinds of financial goals you have for yourself and your future, learning how to budget is crucial for reaching those milestones and, eventually, finding financial freedom. Read on for seven tips for setting (and sticking to) your personal budget.

Tips for setting a personal budget that works

1. Set goals you can stick to
2. Start by figuring out your income.
3. Evaluate your “wants” vs. your “needs.”
4. Hop on the “loud budgeting” trend.
5. Allocate all of your income.
6. Automate your expenses.
7. Find ways to set spending limits.
8. Reevaluate every month.
9. Enlist the help of a budgeting app.

Set goals you can stick to.

Knowing how to budget is an invaluable life skill. It ensures that you’re staying on top of your bills and expenses, and it also lets you develop better financial literacy. In other words, good budgeting means that you never have to wonder where your money is going!

In addition, one huge reason that many people look to budget is because they’re trying to save for their future. So whether you’re trying to save for a big purchase like a house, set aside a sizable nest egg for the future, or just make sure that you’re going to be covered in case of an emergency, you should outline a concrete goal or two that will help guide your budgeting.

A helpful guideline to follow is to set SMART (specific, measurable, attainable, realistic, and timely) goals. This can help you calculate exactly how much money you’ll need in the exact amount of time that you outline for yourself. So let’s say you’re trying to save an additional $20,000 to go towards a home down payment. A SMART goal might look something like this:

• I want to save $20,000 in four years, which equates to $5,000 per year.
• To save $5,000 per year, I need to put $417 into savings each month.

By making your goals this specific, you can determine exactly how much you need to be saving to reach your goals—and thus, give you a definite guide on how you should be budgeting your expenses.

Start by figuring out your income.

Now that you know what goals you’re working toward, it’s time to actually sit down and figure out how you’re going to allocate your funds for the month. The first step: taking a look at your income.

You can do this by checking out your recent pay stubs and/or invoices to get a good picture of what your monthly income looks like. Don’t forget to include other forms of income as well (think: investment dividends, real estate, government payments, or other streams of passive income). Once you’ve collected all the information you need, tally up your monthly totals so you have a good understanding of the money you’ll have to work with.

A side note: If your income tends to fluctuate from month to month, you can still budget effectively. Consider taking averages of your monthly income to get a general idea of your income.

Evaluate your “wants” vs. your “needs.”

Once you’ve figured out your average income, carefully review your regular monthly expenses and how much money you’ll need to cover the total amount. Now is the time to assess every item in your budget to decide which of those items are things that you really need, versus which things are more negotiable. For example, your “needs” may include:

• Rent or mortgage
• Insurance premiums
• Utilities
• Internet and phone bills
• Groceries

Meanwhile, some common “wants” may include:

• Streaming services
• Subscription services
• Tech upgrades

By taking an honest look at what you really need versus the things that are non-necessities, you can prioritize the things in your budget that need to be paid first. To be clear: you definitely don’t need to eliminate any of your “wants” if you don’t want to and if you can afford them. However, it’s a good exercise for establishing the important spending points in your budget, prioritizing where to spend first, and perhaps finding some places you can cut down if need be.

Hop on the “loud budgeting” trend.

Let’s face it: one of the hardest parts of budgeting is actually staying within your set limits — and this is especially true during the times that your friends and family (accidentally and well-meaningly) encourage overspending by asking you to meet them at your favorite restaurants or invite you along to those dream vacations that are just so hard to turn down.

If these scenarios have historically been a roadblock for you, now is the time to embrace “loud budgeting!” This viral trend has been all over social media, and for good reason. It’s just like it sounds: rather than keeping your financial situation quiet, going along with the same old spending habits out of fear of talking about money, “loud” budgeting encourages you to get vocal about your financial goals.

You can practice loud budgeting by:

• Letting your friends in on your goals and telling them you’re saving for something specific
• Telling them exactly what your spending limits are, whether it’s for that dinner or on that vacation
• Declining an activity, but letting them know that it’s because you don’t want to spend on it or that it’s not in the budget right now

Loud budgeting has a ton of benefits: not only does it let your circle know exactly why you’re declining that invitation, but it also lets them cheer on your financial willpower. You might even find that getting loud about your budgeting opens up a healthy dialogue about financial literacy in your circle. Friends help friends manage their money and meet their goals!

Allocate all of your income.

To make a really effective budget, you should attempt to budget every single dollar that comes into your bank account throughout the month. According to Fortune, this budgeting technique is often referred to as zero-based budgeting, and it’s a good idea for many reasons: it gives you 100% certainty about where your money is going every month, you can customize it to meet your specific needs, and it might even help you save some more in the process. It can also be helpful if you have a bad habit of impulse spending. By budgeting to zero, you have set guidelines for where all of your money is going, so there’s no room for surprises and possible financial regret.

Automate your expenses.

Once you’ve determined where your money is going, you can then figure out a way to make sure it all goes exactly where it’s supposed to. One good way to do this is to automate the expenses that are fixed. Fixed expenses are like your chores list: They don’t change, like cleaning your room, doing your homework, or feeding your pet. In the same way, fixed expenses are things your family has to pay for every month that don’t change, like the rent for your house, a car payment, or the money to keep your internet running. It’s like knowing exactly how many chores you have to do every month!

Using an all-in-one budgeting and financial app such as Marygold & Co. makes automating fixed expenses faster with less friction, so you don’t have to toggle between apps or screens. Not only does this help you stay on budget, and avoid getting hit with a bunch of late fees, but it also makes keeping track of your expenses a little bit easier each month.

Find ways to set spending limits.

It’s one thing to set a budget — but it’s a whole other thing to actually follow it.

So find ways to make sure that you’re following your budget every month! Keeping track of all of your expenses and monitoring every transaction can help you stay accountable. Don’t forget to include credit card and cash expenses in addition to the ones you track on your spending accounts.

Even better: see if your banking app allows you to set spending limits! If so, this automatic, self-imposed limit can help you stay within your means and prevent accidental overreaching that negates all of your careful budgeting.

Reevaluate every month.

Things change. Even the most steady and consistent spenders are probably going to find that their budgets need to be adjusted every now and again to better fit your goals. Even after carefully figuring out how much money you should be setting aside for each category, you might find yourself in different circumstances, like:

• You finished paying off your car, so now you have some extra funds each month.
• An urgent and unexpected car repair came up, so now you need to shift your current month’s spending to cover the mechanic bill.
• You renewed your yearly lease, but your rent has gone up.
• You’ve decided to take the plunge and plan that dream vacation, so you’ll need to save up for it.

So even if you make the same income every single month and have the same basic bills and expenses, it’s worth revisiting your self-imposed budget each month to determine if there are things that need to be moved around.

Enlist the help of a budgeting app.

Finally, it’s well worth using a budgeting or financial management app to keep you on track throughout the month. These apps make it easier than ever to track and categorize your expenses, get visuals on where you’re spending, and identify any places that might be improved to better serve your financial goals.

Budgeting app options

• Marygold & Co. – This unique financial management app makes it easier to keep an eye on all of your financial interests, including your budget management. You can set customized spending limits, get at-a-glance information about your unique spending habits, and even invest in Money Pools to get closer to your financial goals.
• You Need A Budget (YNAB) – This personal budget app is designed to help users keep track of every dollar they spend by following the zero-based budgeting philosophy. It offers detailed money planning and strategy so you can keep a closer eye on all of your finances.
• Simplifi – This popular budgeting app by Quicken has a variety of tools that can help you customize a budget and keep track of your savings goals.

The bottom line

No matter what kinds of goals you have for your future, knowing how to budget is a must. Taking the time now to evaluate your expenses and come up with a budget can pay off in a big way in the future: from helping you be prepared when an emergency comes up, allowing you to save for those big purchases, to even setting you up for major life milestones like retirement. It’s a crucial step in understanding your finances, and ultimately, finding financial freedom.