Simple Budgeting Ideas
Some people are blessed with enough money that they really don’t need to worry about what they spend. The rest of us, however, need to budget our money to make sure everything is covered.
Here are a few ideas on how and what to do.
- Keep a money diary for a month – It’s hard to plan a budget when you don’t know what you are spending your money on. It’s pretty easy to keep track of the big expenses, but lots of small amounts add up quickly. A lot of people think that since they use a debit card exclusively, this step doesn’t matter because at the end of the month they can see where the money went, but keeping a logbook makes you be more aware of the small purchases you are making.
- Use the envelope system – If you have relatively simple budget or make a lot of cash (like a server), write out envelopes with the amounts of all of your recurring bills on them. Each time you get paid, put the cash that needs to come out of each check into the envelope for each bill. What is left over is your discretionary income.
- Be careful if you use Autopay – This is especially true if you don’t have overdraft protection. Auto pay is designed to come out of your account the same day every month, but many people don’t get paid the same days every month, so if you aren’t careful an autopay for a large bill like house or car payment can come out when you don’t have enough on hand to cover it, causing the payment to be returned and costing you overdraft fees, which can then cause other things to bounce, causing a vicious circle.
- Be careful if you use credit cards – another common strategy is to have all autopay bills go onto a credit card and then make the credit card payment. This works well if you do two things. First is to Pay the balance off in full every month so you aren’t paying interest on your bills. The second is to make sure that your bills don’t push your card balance over 50% of the credit limit. Cards that are over 50% have a negative impact on your credit rating and even if you pay the card off every month, the balance isn’t always reported at the end of a billing cycle, so the card may show a high balance every month, even if it is getting paid in full.
What ways do you budget?