Creating a budget allows you to make sure your monthly spending is realistic and ensures you don’t spend more money than you make.
Budgeting is also important if you have debt to pay off, as it can help you guarantee that you will have enough money left over each month to cover your debt payments.
When it is no longer a guessing game, you can figure out how quickly you can pay down your debt or amass savings.
Budgeting can get complicated when you have more than one bank account. Use these tips to keep your finances organized and create a budget that works for you.
1. Use an online budgeting tool.
When you are trying to budget across multiple accounts or banks, a free online tool like Mint can help you immensely. You give it permission to access all of your bank accounts, and it automatically feeds in your latest transactions and balances.
Mint automatically detects the categories of your purchases and helps you track how much you spend in each area.
You can set up goals, such as only spending $300 on food per month, and log in regularly to track your progress or reallocate funds from one category to another.
It can also feed in your mortgage, loans and investment accounts to give you an overview of your financial health.
2. Use a spreadsheet or software.
Not everyone likes using an online tool for fear of security breaches. Instead, you may want to use desktop software like Quicken.
The problem with a spreadsheet is you have to manually enter your spending information. With several bank accounts, that can get time consuming and create room for error.
However, it is a safe and easy way to digitally create a budget.
“Tweak your budget over time until
it represents the right balance.”
3. Try the envelope system.
Some people find it is easiest to use the envelope method, which makes it impossible to overspend because you can’t rely on a credit card. It also prevents you from having to worry about multiple bank accounts.
How does it work? First, figure out how much money you need for your basic necessities each month.
At the beginning of the month, withdraw your monthly spending money in cash. Place it in envelopes labeled by category, such as food, gas and entertainment.
You can use funds each month for those expenses using this cash. At the end of the month, put anything left over toward your debt or savings.
This method helps you completely avoid accumulating any credit card debt by only spending money you have and not being able to spend anymore when it runs out.
4. Practice makes perfect.
When first starting off, you will find you may not have set up your budget perfectly.
You may have run out of money for groceries but had a lot left over for gas, or perhaps you spent less money than you thought you would on groceries and are excited to find you have more left for entertainment than you realized.
Luckily, there is no reason your budget has to be set in stone. You can finesse it and tweak it over time until you feel it represents the right balance of spending for you.
Photo source: thenest.com.