It’s a familiar problem for far too many people. You work yourself to the bone, more than 40 hours a week, and you seem to be making decent money. But somehow, it all vanishes by the end of the month. You might even look at your paycheck and know you’re making enough to pay the bills, but you fall short when it comes time to make the payment.
It all comes down to budgeting. Sadly, very few people are taught proper budgeting as they grow up and go through school. As a result, when you enter the adult world, you’re wondering, how DO I manage my money? If you think this describes you, don’t feel bad – you are not alone, and we are here to help. Studies have shown that more than half of Americans have no idea how to make a budget. Most of them can’t even say how much money they spent in the prior month.
Many of us desperately need a better understanding of home budgeting and how money management apps can help us improve our home finances. So let’s discuss how your paycheck tends to vanish before you need it – and how to retake control of your money again.
Where Is All My Money Disappearing?
In most cases, when we lose track of our money, we’re likely making purchases without thinking about how they all add up. As a result, random costs eat into your paycheck unnecessarily.
Some of the most common causes of ‘lost’ money include:
1 – Impulse buys when shopping
Going shopping without a shopping list is an invitation to overspend. This is particularly true at the grocery store, where it’s easy to impulse-buy a lot of food without thinking about how you will use it, especially when you’re hungry. This can also include random clothes, games, or other impulse purchases which we buy without looking at the price tag.
And speaking of food…
2 – Throwing away good leftovers
Food waste is a huge problem in general. Do you discover a new “science experiment” molding at the back of your fridge every now and then? We often throw away food that could be reclaimed and reused before reaching the decaying state. Food waste can quickly eat through a food budget and lead to unplanned costs. (Or too many expensive delivery orders.) Using a basic meal plan can resolve most of your food waste.
3 – Online subscriptions
Netflix, Amazon Prime, Disney Plus, Spotify, Gamepass, audiobooks… There are so many subscription services. Each with its own costs. It’s “only” a few dollars each month. However, these absolutely add up. Suppose you have 10 different subscriptions at an average of about $10 each (some costs would be higher, some lower)… over the period of a year, that adds up to about $1,000. We often forget how many subscription services we buy into and don’t realize how much money we’re actually spending. If we could free up the unnecessary subscriptions, imagine how much difference that money could make to increase savings, reduce debt, or help you enjoy a lovely holiday sooner.
4 – Showing off
We all have a list of wants and must-haves. Maybe a flashy new car, larger house, top-of-the-line clothes, and other things to show off, but that can quickly wipe out our paycheck. “Showy” luxury expensive purchases should be avoided while getting your finances in order.. Save these items for one at a time when you can pay cash without affecting your financial future.
5 – Gambling
Gambling of any type is a sucker’s game. Whether it’s the weekly lottery, online gambling, or bar bets, people who start gambling will quickly lose track of their spending – and rarely win enough to make up the losses.
Taking Control Of Your Spending
So, if you recognize that you need to keep better track of your spending and start thinking about budgeting, how do you do it? Here’s how to get started.
1 – Select A Money Management App
Tracking your spending and budgeting by hand is a great start, but the calculations can be very complicated. Plus, you will likely run into many human errors that you can avoid with the Idealapp. There are numerous budget organizer applications and software available. Having a strong financial app at your fingertipswill make the process so much easier. The idealbudget will do more than track what you have done and are presently doing with your money. It will allow you to plan for years to come to prepared well for your future finances.
2 – Know what you’re making after taxes
Remember, the government is going to always take a large chunk of your paycheck for taxes, fees, and entitlements. So always base your budget calculations on your net final take-home pay, not the initial gross pay before taxes.
Also, don’t assume you’ll be getting a tax refund either. Instead, treat your return as a happy bonus, not something to expect and lean on for balancing your budget.
3 – Track all your expenses for a month
You need to know what you’re actually spending to get started. So, for one month, for every single purchase, write down or enter each one into a money management app. Don’t skip anything, not even a dollar candy bar at the store. You need to know, realistically, what all of your spendingsentail.
You won’t necessarily need to track every single tiny purchase like that forever, but you need an accurate baseline to get started. Also, don’t make exceptions for things you’re buying on credit. You’ll spend more for them over time due to interest rates if you don’t pay itoff right away.
4 – Categorize your spending
Once you’ve got a handle on what you’re actually paying money for, you can start breaking those totals down into basic categories like “Utility bills”, “Food and drink”, and “Impulse buys”. Plus, of course, major standalone expenses such as “Rent”, “Car payments”, and “Credit card bills”.
These categories should be entered into your money management app, which will be your starting point for getting control of your finances.
5 – Embrace the 50/30/20 model
There are manyf different ways you could structure your home budget, but the 50/30/20 model is typically best for most people.
Simply put, that means your monthly paycheck should be used:
- 50% on necessities and unavoidable payments
- 30% on wants, impulse buys, and non-necessities, and
- 20% goes into the bank as savings or into other genuine investments
If you can make your spending match this model, you’ll be able to stay within your monthly budget easily – all while stashing money away for an emergency.
6 – Start cutting costs
The 50% part of the 50/30/20 model is unavoidable. Those are the costs that you must pay every month for housing, food, clothes, gasoline, etc. So, to cut costs, the cuts should come from the 30% non-necessity buys.
Unsubscribe from some of those online services. Buy food in bulk, when possible. Eat your leftovers. Never gamble. SERIOUSLY! Cut your extra spending until you’ve hit that 30% mark, and you’ll be on the road to financial stability. Look over your “necessary” purchases and decide if any part of those expenses could be reduced in a way that they still meet your needs while keeping more money in your pocket. Consider something like your home. If it is much larger than your needs at a higher expense, consider a smaller house or one in a more remote location that will reduce your housing expenses to use the extra money to cover other necessities, reduce debt, or increase your savings.
Then keep at it! Don’t let your budgeting slip, and you’ll stay on course.
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CalendarBudget makes it easy to create a household budget – and it’s highly affordable as well. To see how simple it can be to take control of your finances, click here for a 30-Day free trial of our money management app!