When managing life, eventually you have to figure out how much is coming in, and how much is going out. This is called a budget which can be a not so easy task. Let’s look on how to make budgeting easier.
Reduce Chances Of Human Error
If your life is very simple with low assets, budgeting can be done on a piece of paper. However, if you have a family, two incomes and many assets, working out a budget can be more complicated. Being single makes budgeting a cinch, you only have your income and what you spend to keep up with. Add a spouse and some kids into the mix and it just got harder. So how to make budgeting easier?
People used to buy budgeting journals or planner books to keep up with their expenses. This was a smart idea but plenty of room for human error. Addition and subtraction are easy enough for most, but no one is perfect. Creating a mathematical mistake is just human. So, calculators were used, now you have two formats to keep a budget on. Calculate the numbers on one and then transfer it to another.
In today’s times, there is no reason not to utilize software for budgeting. Keep all your records and math all on the same platform. Let it do the work for you by automatic projection and especially doing all the math for you. Fortunately, there are free versions of software to use and way to make budgeting easier by paid versions. Premium software may be your best choice, especially if you are a busy person. After all, human error is often caused due to distraction and not being focused. If your life is hectic and always on the go, it is really hard to concentrate working numbers.
How A Software Can Help
Software helps keep the planet green, no waste of paper. Using a software makes budgeting easier by digital record keeping. Most allow you to set net income, then set what you have going out and then shows you what your budget is. These can be set for weekly, monthly to annually, whatever you need the information for. How it makes budgeting easier, is you only have to set it up once. You create a list of everything you pay out, and it will constantly give you your budget. If things change or new expenses come into play. You just enter them and it gives you easy results of what you have left over.
Trying to keep up with your budget “old school” on a piece of paper or in a ledger, can lead to mistakes. You have to constantly re-enter your income and expenses for each month. However, if you don’t have any changes, you should be good. It just doesn’t make sense to list everything out on a piece of paper, then use a calculator to transfer the info back. A software allows you to keep all your information on one platform and even give you a report.
Now you may think that getting a budgeting software would be too expensive, but on the contrary, some are free. A premium software is going to give you more bells and whistles, but as mentioned before. If you have simple expenses, you don’t need a lot to keep up with your budget.
Why Do You Need A Budget
It is always a good life practice to keep a budget. You may be surprised how many people spend more than they make. Getting credit and credit cards is pretty easy and this is where you get into trouble. To obtain credit or credit cards, creditors often only look at what your income is. So, this allows you to get a multitude of credit cards. Before long they all add up to a high amount quickly. A credit card interest on the average is at least 25%. It is designed that way so you never get them paid off.
To make a budget seem easy enough, you record your income, utilities, food, rent/mortgage, apparel and fuel for your vehicle. That is pretty simple to keep up with, but the credit cards and bad habits is where you get in over your head. Once the cards come into play, the more you purchase, the more the payment goes up. The more you go out for entertainment, the more your budget becomes unstable.
It can be really easy to start spending more than what you make based on these factors. Let’s say your budget shows $500 a month left over. Now you want to buy a new car and you can get it for $400 a month. Did you account for insurance increase? What about automotive repairs not covered by a warranty? This can easily start costing you more than what you have to spend. Life always brings us those unexpected bills we hadn’t planned on. You always want to make sure you put back at least 20% each month for surprise expenses.
50/20/30 Rule
The 50/20/30 budget rule is an intuitive and simple plan to help people reach their financial goals. The rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must-have or must-do. The remaining half should be split up between 20% savings and debt repayment and 30% to everything else that you might want.
50% needs are those bills or payments that you absolutely have to have for survival. Things like a roof over your head and food. 30% can be spent on things you want, like entertainment, going out to eat, hobbies and things like that. The 20% should be Savings, the money you put back to build your nest egg. This percentage is what should help for when you have a surprise expense. A budgeting software can help identify your expenses and start appropriating your money in the right places.
Free Software
I am sure many of you have heard of Microsoft Excel. To buy that program can be a bit pricey, however, there is a way to use it for free. Google offers a free version of Excel that is totally free to use. Actually, they offer something similar to the MS Suite, called G Suite. It gives you their versions of Excel, Word and PowerPoint. Local schools have their students use it due to the accessibility, being free and compatibility.
Google Sheets also provides templates for many type scenarios, a budgeting template is one of them. I actually have done some videos on how to create a budget to using Google Sheets. View all three videos in this playlist HERE.
Using Google Sheets isn’t that hard and there are tutorials that show you how to use it even more. If you are fortunate enough to have MS Excel either on your computer or using Office 365. You may want to get more information on how to use Excel. There are plenty of eBooks that are reasonably priced that can guide you through most scenarios. View a variety of Excel Help books HERE.
Try the Google Sheets budgeting templates out, they are basic, free and very helpful. Like I said, if you are single, and no big list of expenses, pen and paper could do it. However, I still recommend using a software of some type. It reduces the chances of mathematical errors and simplifies the task all around. Software usually provide reports, and reports have a way to help visualize your spending’s.
