Do you have a budget for this year?
If you don’t, now is the time to set one up! Budgeting is the best way to keep your spending under control, make sure you have enough to cover your bills, and help you save more every month.
But creating your own budget can seem like a mammoth task. Luckily, we’re here to help! In this article, we’ll explore some of the most popular and effective budgeting strategies to consider.
A budgeting strategy is a means to manage your money to ensure your expenditure doesn’t exceed your income. A budgeting strategy is also useful in helping you save up for major purchases, such as a new vehicle. It can also help you maintain positive savings habits, such as regularly putting money away towards retirement savings.
Take a look at our top budgeting tips to create your own budget and save more money.
There’s no perfect time to start budgeting, so don’t wait for the start of a month or year! Start creating your budget today and get on top of your money. In the long run, you’ll thank yourself for putting in the time.
To start your budget, you first need to calculate your income. If you have income from different sources, make sure to add them together. If your income varies from month to month because you’re self-employed or work on commission, calculate a realistic average for the year ahead.
You also need to subtract any deductions. For example, you might have income taxes, social security, and insurance to pay. Once you’ve deducted these, you’ll be left with your net income, which is what you take home every month.
If you’re self-employed or have an irregular income, creating a budget can be tricky! This is where you need some different budgeting strategies. The best way to create a budget with an irregular income is to work backwards.
Start with determining how much money you’ll need to get by. Add up your bills, food costs, and other expenses. This is the basic salary you need to bring in every month.
You can then look at how much money you should be putting aside for savings, luxury items, and entertainment, such as nights out. If you’re in an industry that has a busy period, plan to save more during these months to give you a cushion for when work is slower.
If you’re self-employed and hire employees, make sure to check out the benefits of Payactiv! After all, it’s not just your budget that’s important when you’re a boss, but that of your employees too.
Next, you need to collect all of your bills and organize them into time categories. Record which are due weekly, monthly, quarterly, and yearly. Once you know when each is due, you can plan to put aside money for them in your budget.
For bills that aren’t frequent, like yearly bills, it’s a good idea to put money aside for them throughout the year. Incorporate this into your monthly savings so that you don’t get caught off-guard at the end of the year!
In your budget, deduct your bills to work out what’s left.
It’s tricky to know how much you actually spend without tracking it. You might think you spend a few hundred dollars a month on groceries, but when you add up all the small trips to your local shop and the snacks you buy, that number might go up significantly! Go over your financial statements from the past few months – or even year, if you can – and work out how much you spend every month.
To help you out, here are some categories you can split your spending into:
You should be able to put all of your purchases into one of these categories. If you can’t, make a new one! Once this is done, you’ll have a better idea of how much you’re spending every month.
When you make a financial budget, it’s important you set out some financial goals to help you stay responsible with your money. Your financial goals are entirely personal. By identifying your priorities, you can create a clear budget to follow. Having these goals will also motivate you to get better with your spending or saving, helping you have a great financial year!
These goals can be anything from paying off a chunk of your debt by the end of the year to saving up to buy a car. Or perhaps you want to cut down on the number of shoes or takeout meals you buy.
We highly recommend making paying off your debt one of your top goals for the year ahead.
Here are some tips to get started:
Taking small, incremental steps and congratulating yourself for every quick win will give you a sense of empowerment and control. More importantly, it’ll put you on track to gaining financial stability and security.
Once you’ve drawn up your budget and financial goals, it’s time to look at where you can cut back on lifestyle spending. For example, swap your weekly dinner out with friends for a home-cooked meal with them.
Your must-have expenses should always come first. Your wants can easily be changed to make room for your must-haves.
If you’re ever struggling with your bills, look into the Payactiv Visa® Payroll Card that lets you access your earned wages.
Unexpected expenses such as medical bills, car repairs, or broken appliances always seem to crop up at the worst possible time. And nothing makes a stressful or frustrating experience worse than not having the money on hand to deal with it.
Setting up an emergency fund that you can access will avoid you going into costly credit card debt or taking out a high-interest loan. Building up this “buffer” isn’t easy, and it takes discipline, but the rewards are well worth the effort. Start with small goals – say $100 – then increase it to $500, and then $1,000. Experts suggest building an emergency fund that will cover a full three to six months of your regular expenses.
Emergencies will always happen, but if you have a “rainy day” fund tucked away, at least you’ll be able to manage them.
Now for a little theory.
The 50/30/20 budgeting system is a popular budgeting strategy that uses pre-set ratios to help you manage your money.
In terms of this strategy, you should direct 50% of your income to regular, fixed expenses such as your rent, groceries, and utility bills. A 30% portion should go to non-essential expenditure such as entertainment, while the final 20% should be channeled into paying off your debt and building your savings.
Another option is to try out and select one of the following three categories of budgeting:
Subtraction budgeting: Subtraction budgeting is a very straightforward approach. With subtraction budgeting, you tally up all your monthly expenses and then subtract that amount from your total monthly income. What’s left over is the amount you can spend on entertainment or put into savings.
Cash budgeting: Cash budgeting is also referred to as envelope budgeting. Here, you favor cash in hand rather than digital banking. This approach is ideal for people who find it difficult to track how they spend money when using debit or credit cards. With this strategy, you’ll cash in your full paycheck and keep the money aside somewhere safe until you need it to pay your expenses, so you’re not tempted to spend it on other things.
Proportional budgeting: With this strategy, you segment all your expenses into three categories—needs, wants, and savings. It’s similar to the 50/30/20 approach, but in this case, you decide what portion of your income to assign to each category.
Another one of the most popular budgeting strategies to consider is the zero-balance approach. Essentially, this model centers on ensuring you set aside a sufficient portion of your income to cover your necessary expenses. If you choose to follow this approach, you’ll need to sit down and draw up a list of all the expenses you have and how much money you need every month to cover them. The total amount of your monthly expenses should be less than your total income, and, ideally, this will leave you with some surplus cash to put into savings or to reduce your debt.
The advantage of the zero balance approach is that it gives you clarity on where every dollar you earn is going. It opens your eyes to where you may be falling into poor spending habits and helps you pinpoint areas where you could reduce or eliminate unnecessary spending.
Be sure that you harness the full power of digital banking tools and automation as part of your chosen budgeting strategies. This could include taking advantage of banks’ built-in payment and budgeting systems.
It’s quick and easy to set up automatic bill payments and cash transfers to ensure you pay all your expenses on time, never miss any payments, and stay on track with your savings goals – without having to lift a finger!
Why not consider asking your employer about Payactiv’s Earned Wage Access services and financial wellness tools, which can go a long way to putting you on the path to financial freedom?
Today, there are plenty of online systems and customizable apps you can explore to help you budget and track your spending to keep you moving in the right direction financially. Many of these are free or available at a low cost, and you can access them via your smartphone.
That being said, beware of scams or dubious providers that might use your personal and financial information and data in the wrong ways. Do your homework before signing up and hitting the download button.
EWA allows you to quickly access the money you’ve already earned before payday. It can happen in several ways; the funds can be loaded onto a debit or prepaid card, transferred to your bank account, or even picked up as cash at Walmart. With a service provider like Payactiv, you can use your earned wages to pay for services like Uber or Amazon and pay your bills directly in the app.
The best on-demand pay service providers give you choices with how you want to access your money and always provide a free option. Look for the instant deposit feature so you can access your earned wages in real-time in case of emergencies. Some providers also include additional perks like discounts and special offers. They may also offer handy features like budgeting and savings tools and free bill management.
Once you know how to budget, that’s not the end of your challenge; it’s just the start! Having a budget means nothing unless you put it into practice. So, once you’ve calculated your income, spending, and saving, check in every month or so to make sure you’re staying on track. If there were errors in your budgeting process, feel free to amend them as you go.
There aren’t many elements of a budget that are concrete. You might get a pay rise, your insurance costs may go up, or you might need to start saving for a new goal. Your budget is meant to be flexible, so don’t feel bad if you need to change yours.
For more helpful tips and tricks, be sure to check out the Payactiv blog!
The Great Resignation continues unabated; currently, one in five employees says...
On this episode of Good Cents, we’re tackling BIG money questions What is the...
* The Payactiv Visa Prepaid Card is issued by Central Bank of Kansas City, Member FDIC, pursuant to a license from Visa U.S.A. Inc. Certain fees, terms, and conditions are associated with the approval, maintenance, and use of the Card. You should consult your Cardholder Agreement and the Fee Schedule at payactiv.com/card411. If you have questions regarding the Card or such fees, terms, and conditions, you can contact us toll-free at 877-747-5862, 24 hours a day, 7 days a week.
** Central Bank of Kansas City is the issuer of the Payactiv Visa Prepaid Card only and does not administer, endorse, nor is liable for the Payctiv App.
1 Standard rates for data and messaging may apply from your wireless provider.
Google Play and the Google Play logo are trademarks of Google LLC.
Apple and the Apple logo are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc., registered in the U.S. and other countries.