Translating your expense tracking into a budget can feel intimidating, but with these basics and best practices, you'll be well on your way to better money management.
Why Budgeting is Important
Taking back your financial freedom is easier than ever with endless resources, worksheets, and budgeting strategies. For varying lifestyles, there are various ways to organize and optimize your finances.
Budgeting plays an important role in helping you learn to manage your bills with your discretionary spending so you can do more than just make ends meet. It’s the first step to building a foundation for financial freedom.
Common Budgeting Techniques
The “50/20/30” Rule
“Everything in moderation” is the rule of thumb for this budgeting technique, published by Senator Elizabeth Warren and daughter Amelia Warren Tyiagi in “All Your Worth: The Ultimate Lifetime Money Plan”. With this budget, you won’t have to sacrifice to make ends meet, as long as you are using the majority of your income to cover basic needs, known as fixed costs. Divide your budget into the following buckets:
- Fixed Costs – 50%
- Financial Goals – 20%
- Flex Spending – 30%
Zero-Based Budget
If you need more structure in your budget, the 50/20/30 budget may not work for you. Zero-based budgeting is a more detailed, frugal way to allocate your monthly costs. You will categorize spending in great detail down to dollars and cents until there is $0 left to distribute. Categories can include utilities, car savings, vacation savings, food, coffee, entertainment, etc. With this technique, you’ll know where every single dollar you spend is going.
Quick Tip: Varsity on the Go’s money management feature is perfect to help you track every dollar and CardValet can help you place limits on specific categories you know you have a tendency to exceed.
Tracking Your Spending
It’s a good practice to try to check in on your budget each quarter to make sure you’re staying on the right financial path. During this time, you’ll want to see what costs have fluctuated over time? Do your utilities increase in the summer? Are you finding yourself spending more money on gifts in the winter? Asking these questions frequently can help you adjust your budget as your personal finance goals change over time.
Use Varsity on the Go to track your expenses in the moment, review your eStatements each quarter, limit spending in specific categories, and more! There are an endless array of finance and budgeting apps out there, but here are a few of our favorites.
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