How to plan a monthly budget that actually works
With the current economic climate, managing personal finances through a steady process can make a significant difference. Overdrawn credit cards, sudden medical expenses and other out of the blue events can significantly impact personal financial stability.
Yet, planning a monthly budget seems complicated, overwhelming and tedious to the majority of people. Statistics show that only one in three people decide to actually do this as a monthly activity.
However, this process doesn’t need to be as complicated as you might have thought, and definitely as ominously time consuming. There are a few simple steps you can follow every month to make sure you achieve your financial goals, without spending too much time on this. And if you worry that maybe trying it out will end up in the basket of abandoned New Year’s resolutions because it won’t work, take a look at our list of recommendations and then decide for yourself.
Here is a list of steps for planning a monthly budget that actually works for you.
Plan for your style
We all have our personal styles when it comes to spending and saving. Some choose to pay bills first and then set a small amount aside for savings, while others prefer to indulge themselves and then pay debts. Others like to thoroughly plan, meanwhile, other people opt for reverse budgeting.
For any of these styles, having a tool to write down your financial monthly goals is essential. Which brings us to the next point.
While all personal budgeting used to be done with pen and paper, today you can switch to much less tedious options by using either a free web or mobile App. Or if you’re more analytically inclined, there’s plenty of subscription-based services to assist you with your monthly budget planning.
One thing is for sure – going digital can make a huge difference in tracking your expenses. It’s much easier to analyze all you are spending using one card account or digital wallet, and sending the info to a budgeting App. Without actually having to write all that down and make a mistake. Just make sure to get a certified App, to avoid any security issues.
Analyze your current financial pattern
With everything in place now, you can start seeing how your budget behaves. The more time goes by, the more insights your digital tool will yield regarding your finances. Maybe your standard spending in a month is 3000 AUD, but then again once per quarter you have additional expenses, like a renewing membership to a gym, streaming service, insurance. And let’s not forget annual property or city hall taxes which pop-up when you completely forget about them. All of this will be tracked digitally and the more months go by, the more clarity you will have on how you balance your expenses vs savings.
When you take a look at this, don’t forget the golden rule 50/30/20 – on average con spend 50% on necessities like food, rent, electricity bills, transportation, etc. 20% should go to financial goals, whether that means savings or paying off debt, while 30% can comfortably go to what one enjoys in their daily life: like a dinner, a movie or other types of entertainment.
Go to autopilot financial mode
Once you’re starting to see the budget pattern emerging using your new tools, take the next step. This is the time to consider how much you spend on average, what’s realistic to keep for your daily indulgences, and therefore what could you reasonably set aside for a rainy day.
Going on auto-pilot is a standard option nowadays with most digital financial tools. Once you feel confident about your financial pattern, take a step forward and put your finances on auto-pilot. Having your bills paid automatically and your savings set aside safely for the amount you now know you can reasonably cover every month, will be both time effective, as well as spare you the hassle of bargaining with yourself.
Auto-pilot ends up being a real positive re-enforcement for monthly budgeting the right way. As soon as you’ll see your savings nicely piling up with next to no effort on your side, you’ll know you’re now having a monthly planning budget which works for you.
Spend your monthly allowance worry-free
Whatever is left after auto-pilot is what you can consider a worry-free allowance. Indulge yourself, take a step back and relax. You are still tracking these expenses with your digital tools so you can get an overview and analyze it. But, with that said, you’re enjoying at the same time financially stability, a steadily growing savings account, as well as your own free time the way you’d like it to be.
After all this, remember to fully enjoy now the benefits of a monthly budget that works for you.
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