Posted by Budgeting as we already know from normal experience and the articles written on this website is a necessity for a good financial life.
In this article, we discuss in full detail, budgeting, a very good guide to budgeting, and some of the best budgeting apps you can use.
Let’s start with a very good understanding of the term, budgeting;
Budgeting
Budgeting is the creation of a strategy for how you will spend your money. Budget refers to this expenditure plan. By making this spending plan, you can predict in advance if you will have enough money to accomplish the tasks you need or want to.
It is a financial checkup for the company and is necessary to prevent losses or cash flow problems. Labor law changes, inflation, market expansion, and economic downturns all have an impact on income and spending patterns of an individual or an organization.
With a top-down method, top-level management creates the budget; other levels then carry it out. While using a bottom-up strategy, senior management receives input from multiple levels.
This note will not be complete if we do not consider the various types of budgets.
Types of Budgets
The different types of budgets are listed below;
Corporate Budgets
A corporate budget is done by a company or an organization to maintain cash flow, operating cash and emergency funds with efficiency.
Personal Budgets
This is the type of budget done by a person or a family to ensure that they do not run out of cash.
Government Budgets
The federal government’s financial plan takes into consideration the anticipated level of national income for a certain financial or fiscal year. Taxes, fees, and grants are the sources of funding. It also takes into account the budgeted costs for infrastructure and public services.
Master Budget
A master’s budget is more like the culmination of low-level budgets that were prepared for different areas of business operations.
Operating Budget
The budget you employ to ensure the smooth operation of your firm is known as the operating budget or operational budget.
It details the costs that will be paid in order to keep your firm operating at a profit.
It typically consists of capital costs, fixed costs, variable costs, and non-operating expenses.
Static Budgets
Budgets that are static are ones that never change. This budget outlines the income and expenses that will be constant throughout the year, regardless of whether the business is making money.
Here are some instances of line times in a static budget:
- Supply expenses.
- Upkeep expenses.
- Fees for subscriptions.
- Contractor charges.
- Installing software.
Flexible Budgets
Flexible budgets can be adjusted to reflect changes in revenue and expenses as during a fiscal year, taking into account expected unpredictability.
Financial Budgets
An organization’s financial budget is the second most important budget.
It calculates the resources needed to meet the company’s short- and long-term financial obligations. It also includes the business’s capital requirements.
Cash Budgets
A cash flow budget, often known as a cash budget, provides you with an estimate of the business’s cash intake and outflow for a specific time period. This budget is created based on previous accounts receivable and payable performance.
Therefore, this budget enables you to understand the company’s financial health, ability to meet its debt commitments, and resource utilization at a given point in time.
How to Budget – For Individuals
Budgeting as we know is a powerful tool for financial freedom and management. However, the specifics of budgeting differ from person to person depending on their financial situation.
Follow the steps given below to create your own budget;
Sum Up All of Your Earnings
Include all sources of income, such as salaries, tips, Social Security, disability payments, alimony, and investment income.
Maintain a Spending Log
The best way to determine what your true out pocket costs are is to Keep a record of every dollar you spend for a month, whether you buy with cash or a credit card. Include utilities, subscriptions, and automatic payments.
Establish Monetary Objectives
Do you desire financial savings? repayment of debt? Reduction of your spending? Identify all achievable objectives. Keep in mind that you can change this over time. Decide on the most urgent objectives first, such as debt repayment or setting up an emergency fund.
Compute the Necessary Expenses
These are bills that you have to pay on a regular basis, such as rent, insurance, taxes, child care, or your cell phone bill. They are deducted from your overall revenue.
Recognize Debt Repayments
Get the minimum payment due on each obligation if you are paying off debt such as student loans or a credit card bill. And deduct it from your income.
Plan your Spending
You can spend your remaining revenue, on discretionary expenses. This could be your objectives, like saving money or paying off debt. Also, it needs to account for items like unexpected costs for transportation, entertainment, or food. Based on your goals and what you learned from tracking your spending, give every dollar a task.
Examine Your Goals and Spending Each Month
It is possible that the allocation of your discretionary funds will need to be reviewed and adjusted. If you have a flexible budget, you can avoid over spending.
Budgeting Apps
A budgeting app is a tool used to track your money, including your income, savings, debt repayment progress, and investing, from your computer, tablet, or mobile device.
When your finances change, budgeting applications frequently sync with your financial accounts to provide you with a real-time snapshot.
In order to uncover trends and help users become more conscious of their spending patterns over time and achieve their financial objectives, these apps may also categorize expenditure history.
Best Budgeting Apps in 2023
Here are some of the best mobile apps you can use for budgeting in 2023;
Mint
Mint combines a ton of features with a simple interface. All of your financial accounts, including banking, credit cards, investments, and loans, can be connected. It’s simple to monitor your cash flow and see where your money is going when everything is in one well-designed finance software.
Your savings objectives can be created and tracked with the aid of a budgeting feature. The personalized insights offered by Mint are particularly helpful because the software will hunt for opportunities to increase your savings and notify you of any changes to your regular payments.
As Intuit owns Mint, if you file your taxes using TurboTax, you can also monitor your refund through the app.
YNAB – You Need a Budget
With its distinctive system of assigning every dollar a job, YNAB distinguishes itself from other budgeting programs. It makes use of your actual, up-to-date revenue and demands that you set aside all of it for expenses and spending targets.
YNAB requires more work and a steeper learning curve than the majority of budgeting tools. Yet, that time commitment is also a factor in why this software was developed for people who need to have more control over their finances.
Also, it’s particularly beneficial for those who are dealing with debt or living paycheck to paycheck.
Zeta
Zeta is one of the few free budgeting programs for couples, whether they have joint finances or not. The software is designed for all kinds of couples, including cohabiting partners, engaged, married, and expecting parents.
You can sync multiple accounts to track spending, view your net worth, and manage bills all at once.
Furthermore, you can open a merged no-fee banking account and cards with features such as bill payment, contactless payments, digital checks, All-point ATM network access, and no-account fees.
Simplifi by Quicken
Simplifi by Quicken gets high marks for providing a customized spending plan with real-time updates concerning the amount of money you still have to spend each month.
Furthermore, the software synchronizes your bank accounts to show your current situation and progress toward financial goals. Simplifi by Quicken keeps track of all of your subscriptions and monthly fees, even the ones you don’t use.
Pocketguard
The goal of Pocketguard, which tries to assist users in avoiding expenditures, is clear from the name. It allows you to connect all your accounts so that you can track balances and transactions in one spot.
Furthermore, spending reports from Pocketguard are very helpful, and using hashtags to aggregate expenses together is simple. This budgeting tool tracks your bills, like many others, but it goes a step further by assisting you in negotiating lower prices.
Importance of Budgeting
Budgeting ensures that you will always have enough money for the things you need and the things that are significant to you by allowing you to plan out how you will spend your money.
Therefore, maintaining a budget or spending plan will indeed help you avoid debt or get yourself out of it if you already have it.
The 50 30 20 Budgeting Rule
The 50/20/30 guideline recommends allocating 50% of your income to necessities or needs (such as rent or a mortgage), 30% to wants (such as a vacation or eating out), and 20% to savings (such as an emergency fund or retirement account) and debt repayment on credit cards and other personal loans.
Conclusion
Finally, budgeting is one of the best skills to possess if you want to manage your finances better. Your choice of budgeting apps should depend solely on your sources of income, the complexity of your expenses and your financial goals.