Everyone needs a budget, but so many people are unsure of even where to begin in creating a household budget. With the use of mobile apps you can have the basics right in the palm of your hand!
Budgets are great for everyone at all stages of life, and can help you whether you have never filed for Bankruptcy, are trying to avoid Bankruptcy, are in an open Bankruptcy case or getting a fresh start coming out of Bankruptcy.
Creating a budget can help keep track of where your money is going, as well as creating a savings plan for retirement or even just a ‘rainy day’.
Some of the apps are free, while others may have a fee. There are many apps that are great that you can use for free. Those may be the best to start with.
When you start budgeting the first thing that you will be working towards is allocating your income for your various expenses. For every dollar that you earn each month, you should ear-mark that dollar with a purpose. What this means is that you need to prioritize your expenses. For example, housing and utility costs should first be covered before entertainment, and your groceries before savings and so on.
Budgets do not have to be scary. You can think of them more simplistically, then use that understanding and apply it to the app on your phone. If you do not have a smart phone or even a bank account, you could start by using a word document, spreadsheet or even envelopes. The envelope system is when you label each envelope for a certain expense. Once the money is gone from that envelope, that is it. You are done with spending in that area. You would want to start by allocating money to the necessities, then work from there. Understanding that apps, word documents and spreadsheets are just fancy and convenient ways of doing the same thing may help you visualize how your budget needs to be constructed.
Give your self a bit of a break and realize that the first few months of budgeting will involve a lot of figuring out what your expenses are, and how much needs to be set aside for each category. Not only that, but you will also be figuring out what bills are paid when, and how that effects each paycheck. For example, if your rent check swallows up the majority of your income that you receive at the first of the month, you know that the paycheck(s) you receive later in the month need to be set aside for living expenses that will come up at the beginning of the next month.
Similarly, there will be expenses that you may not at first remember such as yearly fees like car registration or property taxes or even that sneaky little Netflix automatic monthly charge. Your first few months will be a bit of a revelation period and a figuring it out period. Know this going into it, and do not get discouraged.
As you start getting familiar with your budget, your expenses and tracking your expenditures you will start to have ideas of features of budgeting apps that might be important to you.
One feature that you may find important is the ability to synchronize between users for households of 2 or more. This can benefit a multi-person household in situations such as when your significant other has made some purchase without you, you can be immediately aware of the available funds for that spending category. For example, if your significant other has purchased some groceries, they would log the expense into the mobile app on their device, and you could instantly see the adjusted budget for ‘groceries’ in your device. This helps the whole household to be on the same page of knowing what funds are available for various expenses.
Creating customized categories is another great feature. You will want to create categories for needed items as well as for entertainment among many other things. (It is okay to entertain yourself, but you want to have the peace of mind of knowing you have enough money to also pay your bills or buy groceries.)
If you create customized categories, then you can more clearly see each budget item and ensure that you have your income properly allocated. Keep in mind, you do not want to be to specific. You may want separate grocery, restaurant and coffee categories, but do not make them more specific than that.
I like to have separate personal spending accounts for each family member. Essentially giving each person of the household an allowance. I determine how much can be allotted for the month, and disperse it on a weekly basis. In today's world, it is very beneficial to have a debit card, so each member has their own checking account not connected with other accounts. I load each debit card each week with the weekly allowance. This helps keep spending in check, and also allows each member to feel a little more freedom, and control over their own savings and spending. Allowing the personal spending, while having a method to keep it in check, allows more freedom to create a savings and knowledge that the necessary expenses will be covered. This keeps each member of the family happy (they have a spending/savings account of their own!), while also allowing for the family budget to stay on track.
By ear marking your funds for specific categories, you know you have put enough aside for necessities. You will also know if you have the flexibility in your budget for a splurge, or some savings. So keep in mind the benefit of customization when you are looking at features for various apps.
You may also want to consider what time frame you are going to look at for your budget. I personally prefer operating on a monthly basis. Not all my bills are paid in one portion of the month. Knowing this ahead of time I have separated out how my first paycheck is spent. When my next paycheck comes in I can then allocate my income for the remainder of my expenses.
Some of the apps can be so specific as to create daily, weekly, monthly and yearly budgets while others are more general and only offer the monthly option. Choose the option that best works for you, but you may want to start with a monthly budget. A daily budget may be best for situations, for example, where you have saved up for a vacation, and set aside specific amounts to be used while on vacation.
I would also recommend that you regularly 'reconcile' your budgeting application with your bank account to ensure that expenses have not been missed. Keeping on top of your expenses will help you be more aware of areas that could be cut, or areas that could have an increased budget.
I would suggest taking a typical month to review through your expenses, and see what you are spending for standard items such as groceries, transportation et cetra. Once you see how much you need for your necessary items, from there you can expand to entertainment and savings. This will help you create a realistic budget for yourself and for your family.
Once you have created the budget, you can keep yourself within your self-set guidelines, and perhaps even start putting money aside for that ‘rainy day’. One tip that many financial advisers give is that you should slowly start working towards being one month ahead of all of your bills. This means that if something should happen, you have enough savings for one month of expenses. This cushion will also allow you to start working on paying off debt.
Check your mobile apps store for budget applications. Start with a free app to see what style and functions work best for you and your needs. Once you know what works best for you, you can better know if spending a dollar or two on a budget application is money well spent!
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