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How to Keep Your Personal Budget Under Control

How to Keep Your Personal Budget Under Control

Waking up one day and realizing that you don’t have that much money left to use this month is surely nothing nice. I’ve had it happen a couple of times and it wasn’t pretty. It’s not that I don’t have any common sense; the core of the problem sits somewhere else—bad money management.

personal budget

    So how was I able to fix it, and how you can do the same? There are some steps that need to be taken, but before I can tell you what I mean let me explain what this post isn’t about: it’s not about how to make more money, it’s not about saying no to the nice things in life, and it’s not about starving. It is, however, about being aware of where most of your money goes, and about being conscious of your spending habits.

    Monitoring is the first step

    I’m sure you’re familiar with the saying that what gets measured gets improved. This is a rule that’s valid for your personal budget as well. If you want to keep things under control, you need to start by paying close attention to what you’re spending money on. Now, this isn’t the moment where you should restrain yourself from buying something you’d normally buy. It’s just about writing down your expenses and keeping them for later analysis. Keeping note of very expense sounds like a lot of work, but the 21st century comes to rescue.

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    If you have an iPhone or an iPad (or an Android device) then you can use one of many personal financing apps that are available out there (image below).

    iPad-apps

      There are both free and paid solutions, such as:

      I didn’t have the chance to test them all out, so choosing the exact app you’re going to use is up to you. You can start by going to the App Store and searching for either “budget” or “personal finance”, but make sure that your app allows you to:

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      • categorize your expenses
      • add expenses on specific dates
      • add your salary and any income you have
      • input all costs using your local currency
      • change the currency (optional, if you’re spending money in more than one currency)

      One month head start

      Unfortunately, you won’t be able to do everything overnight: you need to spend some time getting data and building your spending profile, so to speak. Usually one month is enough to gather a sufficient amount of data, but if your spending habits are a bit more unpredictable then you might need more time. During this initial month, make sure to set a habit of noting down every expense you make by putting it into your chosen app. Remember to use the right categories, as this will be the only way you’re going to able to analyze this data later on.

      Let me say this again: categorization is key to success here.

      For instance, you can divide your expenses into these categories: rent, food, going out, coffee, alcohol, bills, gas, entertainment, education, etc. This is also a good opportunity to input your salary and any other profits you’re making (e.g.: freelancing, securities, bonds, stocks).

      Review

      When the month is over, it’s time to review your expenses and take notice of all possible areas for improvement. As I said before, the key here is to look at categories of your expenses: some of these categories are completely mandatory, like rent, or your electricity bill, so you can’t do anything about them. Others are not mandatory, but they are part of your “joy of life,” so to speak, so you wouldn’t necessarily want to get rid of them. The rest, however, may prod you into making some conscious decisions and taking a different direction with your money.

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      Start by looking at each category and deciding if you’re comfortable with the amount of money it costs you. If you’re not, then try to find cheaper alternatives or erase some expenses completely. For instance, one of the most interesting revelations for me was that I was spending an incredible amount of money on coffee. The first step I took was the decision to drink more coffee at home as opposed to going out—this one step cut my coffee expenses in half.

      This is just an example, but I’m sure you can see the potential that lies in this method. The more you categorize your expenses, the more areas of improvement you’ll be able to find. Again, this isn’t about lowering the quality of your life—it’s only about erasing stupid expenses and finding new and improved ways to experience as much joy in life and spending less money at the same time. Of course, if the amount of money you spend is more than the amount you earn, then you’re in a lot of trouble. Once you input your salary, every personal finance app will let you know about such a situation.

      When you have all your categories sorted, you can move to the next phase.

      Planning

      The final step is to plan your spending for the next month. Now, this isn’t about writing down what you can and cannot buy, but more about placing some simple guidelines in the back of your head. Things like: drink coffee at home, don’t buy more than three beers at a time, don’t use credit cards to buy cheap items, buy less clothing, and so on.

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      If you manage to pay attention to such guidelines for the duration of the next month, you’ll surely be able to lower some of your expenses with no loss in your quality of life. Actually, being aware of our personal budgets is not that difficult once we realize one thing: the devil is in the details, and when it comes to personal finance, details = small expenses.

      Subconsciously, we all know this. If we’re planning to buy something big—and I mean massively big like some Fort Worth real estate or a new car—then it doesn’t actually affect our monthly budgets. I mean, we always have everything carefully planned out, and know how much we can afford to spend exactly, and how much the investment is going to cost us over the years. However, buying something small here and there doesn’t seem like it can hurt us, but when we add everything at the end of the month, we can see that all those small things have turned into one surprisingly big bill.

      Personal finance apps help us to notice this and then take the right action… as long as we remember to put every expense into the app. I strongly encourage you to give it a shot and check how much money you can save. For me, the change has been significant, to say the least.

      What’s your take on this? Have you faced any surprising problems when dealing with your daily expenses?

       

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      Last Updated on January 2, 2019

      How Personal Finance Software Helps You Get More Out of Your Money

      How Personal Finance Software Helps You Get More Out of Your Money

      Do you know what mental health experts point to as the biggest cause of stress in the United States today? If you said “money,” then ding, ding, we have a winner!

      Three out of four adults today report feeling stressed out about money at least part of the time. People are either worried about not having enough money or whether they’re putting the money they do have to use in the best possible way.

      Your money is either in charge of you or you’re in charge of it, there’s no middle ground. Using some type of personal finance software can help alleviate some of that money stress and better allow you to manage your money effectively. Without it, you may just be setting yourself up for constant financial worry. Life is already tough enough and there’s no need to make it more difficult by simply hoping your money issues will all work out in your favor. Hint: they won’t.

      This guide will help you to understand how personal finance software can better assist with both accomplishing long term financial goals and managing day-to-day aspects of life.

      Whether it’s tracking the savings plan for your child’s college fund or making sure you won’t be in the red with the month’s grocery budget, personal finance software keeps all this information in one convenient place.

      What Exactly is Personal Finance Software?

      Think of it like the dashboard in your car. You have a speedometer to tell you how fast you’re going, an odometer to tell you how far you’ve traveled, and then other gauges to tell you things like how much gas is in the tank and your engine temperature. Personal finance software is essentially the same thing for your money.

      When you install this software on your computer, tablet, or smartphone, it helps to track your money — how much is going in, how much is going out, and its growth. Most personal finance software programs will display your budget, spending, investments, bills, savings accounts, and even retirement plans, levels of debt, and credit score.

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      How It Leads to Financial Improvement

      It shouldn’t come as a surprise, but people who regularly monitor their finances end up wealthier than those who don’t. When you were a kid, keeping track of all of your money in a porcelain piggy bank was pretty easy. As we get older, though, our money becomes spread out across things like car payments, mortgages, retirement funds, taxes, and other investments and debts. All of these things make keeping track of our money a lot more complicated.

      Some types of personal finance software can help make things a little less complicated, setting you up to meet financial goals and taking away some of the stress associated with money.

      Even if you already have a Certified Financial Planner (CFP) some type of personal finance software can be of great benefit. Whereas CFPs focus on the big picture of your money, they don’t handle the day-to-day aspects that determine your overall financial health.

      It’s also not nearly as complicated as you might think and can take out a lot of the tedium that comes with doing everything on an Excel spreadsheet or with a pad and pencil.

      Types of Personal Finance Software

      When it comes to personal finance software, it generally fits into two categories: tax preparation and money management.

      Tax preparation software such as Turbo Tax and H&R Block’s software can help with everything from filing income taxes to IRS rules and regulations and even estate plans. Plus, there’s the benefit of filing online and getting your refund check a lot faster than if you were to mail off your forms after waiting in line at the post office.

      For the purpose of this article, however, will be focusing more on the personal finance software that aids with money management.

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      Money management personal finance software will help you to see the health of your cash flow, pay down debt, forecast for expenses and savings, track investments, pay bills, and do a host of other things that 30 years ago would have practically required a team of accountants.

      When to Use Personal Finance Software

      So far we’ve gone over what exactly personal finance software is and how it can be a benefit to your money. The next logical step in this whole equation is determining when it should be used and how is the best way to go about getting started using it.

      Below are four of the most common and practical ways to use personal finance software. If all or any of these apply to you and your money, then downloading some type of personal finance software is going to be a smart move.

      1. You Have Multiple Accounts

      There’s a good chance that when it comes to your money, it’s in more than one place. Sure, you probably have a checking account, but you may also have a savings account, money market account, and retirement accounts such as an IRA or 401k.

      If you’re like the average American, you probably have two to three credit cards as well. Fifty percent of Americans also don’t have loyalty to just one bank and spread their money across multiple banks.

      Rather than spending hours typing in every detail of every account you have into a spreadsheet, many programs allow you to easily import your account information. This will help to eliminate any mistakes and give you a bird’s eye view of everything at once.

      2. You Want to Automate Some or All of Your Payments

      Please don’t say that you’re still writing out paper checks and dropping each bill in the mailbox. While it’s noble that you’re doing your part to keep postal workers employed, we’re 18 years into the 21st century and you can literally pay every bill online now.

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      There’s no need to log into every account you have and type in your routing number either.

      With personal finance software you can schedule automatic payments and transfers between all of your imported accounts. Automatic transfers will help to make sure you have the necessary funds in the right account to ensure all bills are paid on the appropriate date. Late fees are annoying and do nothing but cost you money. It’s time that you said goodbye to them once and for all.

      3. You Need to Streamline Your Budget

      Perhaps the best feature of personal finance software is that it allows you track everything going in and out of your virtual wallet.

      Nearly every brand of personal finance software out there has easy-to-read graphs and charts that allow you track every cent you spend or earn, should you choose. You might be pretty amazed when you see just how much you spent on eating out last month or if you splurged a little more than you should have on Christmas gifts last year.

      Every successful business on the planet has a budget and using personal finance software can help you trim the fat on your spending in ways that affect your everyday life.

      4. You Have Specific Goals to Meet

      Maybe it’s paying off debt or saving for up something like a European vacation. Whatever your financial goal is, whether it’s long-term or short-term, personal finance software programs are one of the savviest ways to go about reaching those goals.

      You can do everything from set spending alerts to notify you when you’re over budget to automating what percentage of your paycheck goes to things like retirement investments. The personal finance software that you choose should show you exactly how close you are to hitting those goals at any given time.

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      How to Get Started

      From AceMoney to Mint and Quicken, there ’s no shortage of personal finance software apps out there. Many of these programs are free to download and will allow you to pay bills, invest, monitor your net worth and credit profile, and even get a loan with the swipe of a finger.

      Other programs may only offer you limited services and will require a one-time fee or subscription to unlock all that they offer. These fees can often vary from as little as two dollars to 50 bucks a month.

      It’s best to start off with the free version and then gauge whether you’re able to accomplish everything you’d like or if it’s worth exploring one of the paid options. Often times the subscription programs come with assistance from financial planning and investment experts — so that can be a real benefit.

      When deciding which personal finance software program to use, it’s also important to look at how many accounts you wish to monitor. Certain programs limit the number of accounts you can add. Be sure that if you have checking, credit card, and investment accounts to monitor, that you choose a service that can monitor them all.

      Finally, when looking around for the right personal finance software that meets your needs, make sure that you’re comfortable with the program’s interface. It shouldn’t be expected that you recognize every single feature instantly, but if the features don’t seem readable and manageable to you, then you’re not as likely to use it and get the full benefits.

      Final Thoughts

      Personal finance software can go a long way in helping you to take control of your money and meeting your financial goals. It’s important to note, however, that some focus more on budgeting and expense tracking while others prioritize investing portfolios and income taxes. Explore several different programs and read reviews to find the one that’s right for you.

      In this day and age, managing one’s personal finances in a secure manner that allows the user to have a real-time visual representation of their money is easier than ever before. With the numerous applications that are out there — both free and subscription-based — there’s no reason that every person can’t take control of their money and ensure they’re making smart money moves.

      Featured photo credit: rawpixel via unsplash.com

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