Build a Better Budget in 5 Minutes Flat
Do you have a budget?
If not, you've been meaning to get to it, right? According a survey conducted by Bankrate, 40% of Americans don't keep a budget. But if you're dreading getting the job done, maybe you shouldn't be. Budgeting isn't so bad, and it doesn't have to be about spreadsheets and calculations and highlighter pens. In fact, at the most practical level, budgeting is really simple. And it only takes five minutes to get started, plus another five or so minutes for each of the follow up steps to really build your budget. (See also: How to Build Your Budget in 5 Steps)
Ready? Here's how.
Step 1: Use Technology
It's 2013. Sadly, we don't have the flying cars and robotic housemaids I expected from this era, but life has gotten a lot better for budgeters. I'm talking about all the software and websites and apps that do all the hard work of combing through your expenses. So, to get started with your budget, download an app like Check or Mint. They'll connect to your financial accounts and allow you to see everything in one place. They can even categorize your expenses, remind you to pay bills, and track your savings goals. Staying on budget: Thank goodness there's an app for that. (See also: Sites and Apps That Help You Track Your Spending)
Step 2: Find Out What You Need and Remember the 50/20/30 Rule
The key point to making a budget is to ensure that you have the money you need to pay your bills and meet your basic expenses. Use your budgeting app to figure out how much all your bills — rent or mortgage, food, utilities, debt repayment, etc. — are costing you. You may be able to make some adjustments to reduce these costs. That's a smart move. (See also: 5 Ways to Save on Everyday Expenses)
But once you've done that, you need to make sure you have that amount available — in cash — every single month. In theory, that's a simple solution, but it can be tricky in practice, especially for those who have a lot of debt to repay or who earn an inconsistent income. In fact, it can be difficult for just about anyone who doesn't keep track of the money that's coming in and where it's being spent.
Many financial experts recommend the 50/20/30 rule for budgeting, where 50% of your income goes toward essential expenses, 20% goes to long-term financial goals, such as savings and debt repayment, and no more than 30% goes to discretionary expenses. That's a good guideline, but feel free to adjust the ratio to fit your needs and lifestyle.
The key here isn't to fit your finances into some fancy chart, but to know what you're spending your money on and to use that awareness to redirect your spending in a way that'll help you meet your larger financial goals.
Step 3: Set Goals
Speaking of goals, if you don't have any for your money, chances are it'll disappear toward all the little things that tempt us every day — and that only provide short-term satisfaction. If you're like most people, however, you probably have some bigger aspirations, many of which tend to require big bucks. Whether it's traveling, having a family, buying a house or setting money aside for the future, it's important to continuously remind yourself of those goals and continue to contribute to them over the long term as part of your budget. Think big. It'll inspire you and give you something worth working (and saving) for. (See also: Saving Is Easy With the Right Goals)
Step 4: Look for Spending Sinkholes
Spending sinkholes — everyone has them. These are the quicksand expenses that pull you in and continue to drag down your budget. They also explain why it's possible to have a paycheck on Monday and be left with nothing but crumpled receipts and confusion by Friday.
Maybe you're a sucker for coffee drinks or comic books or sparkly dog collars. For me it's the coffee, along with yoga pants and expensive treats from the farmers market. If I'm not careful, a whole lot of money can disappear to these (seemingly little) luxuries. Fortunately, you don't have to cut them out altogether. Instead, use your budgeting app to set a spending cap that you can afford. That means you need to be able to pay for these things with cash and after you've met your basic expenses. You can use the additional money you might have spent to pay down debt or contribute to savings. (See also: 8 Small Luxuries That Go a Long Way)
Step 5: Repeat
Every month is a little different. Perhaps you earn more, or spend more, or run into unexpected financial trouble. Or maybe your expenses or goals have changed. That's why it's important to spend five minutes recalibrating your five-minute budget on a regular basis. The key to budgeting isn't to make things super complicated and technical, but to become mindful and aware of where your money goes. That part of the equation really only takes five minutes, but it has to happen often in order for it to be effective. If it doesn't, you'll probably push the whole idea back under rug with all that other stuff you've been meaning to do. (See also: Creating a Reasonable To-Do List)
If you have time to send a text message or compose an email, you have time to get started on budgeting your money. Making larger changes, such as boosting your savings account or paying down debt, can take years. Fortunately, you really can tackle these giants five minutes at a time. Or you can do nothing at all. Your choice.
But do consider ditching the excuses. You'll be richer before you know it.
What simple budgeting strategies do you use? Share them with me in the comments.