With a little planning and perseverance, you can develop a budget that will make your new year shine!
Building and maintaining a budget can sometimes seem a little overwhelming at first, but picking up the skill is one of the most important things you can do to reach your financial goals and boost your financial wellness.
With a solid budget, you can:
- Prevent yourself from overspending.
- Build and maintain an emergency fund.
- Pay down debt faster.
- Stay on track with your financial goals.
Not everyone maintains a budget, and if you haven’t done so yet (or you aren’t good at it), don’t worry! Now is the perfect time to start, and this article will give you information on various budget methods and some tips on how to stick to one.
Choose a Budget Method
While there’s no one-size-fits-all budget in existence, there are a number of methods you can choose from that work well for a lot of people.
To start, think about your financial situation and your goals. Are you working toward paying off debt? Are you saving up for a home down payment? Do you need to build a better emergency fund?
Overall, your individual management style and your financial goals will help you determine how to budget your money and what method might work best. Here are some popular ones to consider:
The 50/30/20 Method
Many people find the 50/30/20 Method helpful because they can pay bills, save money, and spend money without feeling like they’re denying themselves everything.
With this method, you put 50% of your net income toward living expenses, 30% toward wants, and 20% toward savings and debt payments. If you overspend in one category, you can temporarily cut back in another category and rebalance your spending the following month.
The 80/20 Method
“Pay yourself first” could be the mantra for the 80/20 Method since the main objective here is to immediately set 20% of your net income aside for savings and debt repayment. The 80% then goes toward your living expenses and your wants.
If you manage these categories well each month and you still have money left over, you can choose to save it or put toward your debts.
The Zero-Based Budget Method
The Zero-Based Budget has you plan where every dollar goes so that, at the end of the month, your income minus your expenses equals zero. Every dollar that you receive has a purpose and a goal.
To begin, determine your monthly net income. Then, list out all of your expenses, your debts, and your savings goals and assign them amounts. After deducting all expenses, you should have a zero balance.
Fast Fact: A 2023 Harris Poll survey found that 74% of Americans have a monthly budget and 84% of them say they sometimes exceed it.
Stick to Your Budget
Once you’ve found a budget method that works for you, it’s time to put some tactics in place to help you stick to it. Try these five ideas:
Keep Track of Every Expense
As you start budgeting for the year, it’s a great idea to track every expense for a few months to see exactly where your money is going. While it may seem tedious, it can be a real eye-opener and help you adjust spending categories to better favor your goals.
You can use a spreadsheet, pen and notebook, or app to track each expense, depending on how technical you want to get. If you like using apps, The Spending Tracker by MH Riley Ltd is an easy (and free) one to try. It doesn’t require any banking information, and you won’t get bombarded with promotional emails.
Use a Budgeting App
If tracking every penny doesn’t appeal to you, Chambers Bank has a digital money management tool called Personal Finance, which you can use for free through Online Banking and Mobile Banking. WIth it, you can see all your financial accounts in one place, including all of your Chambers accounts plus external loan accounts, credit card accounts, investments, and more.
Some of the most-loved features of this app include budgeting, account aggregation, categorization, and mobile access.
Automate Your Savings
Some of the money in your budget is likely earmarked for savings (or should be). That said, it’s important to make sure you’re regularly contributing to a savings account. You can easily set up a Chambers Savings Account online or visit one of our branch locations to sign up for one. You’ll get a free debit card, Online Banking access, and Mobile Banking access.
To move money to your Chambers Savings Account, it’s easy to either set up a direct deposit through your employer’s payroll or schedule a recurring transfer between your Chambers accounts.
If you have an external checking or savings account, you can usually also schedule a recurring transfer directly to your Chambers Savings Account; check with your account provider for more details.
Establish a Spending Account
Sometimes, it’s easy to overspend and either dip into savings or use up that extra cash that could go toward savings or debt repayments.
If this has been a problem for you or you’re worried it will be, try opening up a Chambers Checking Account and use it for budgeted expenses … nothing else. Once you’ve spent down the amount, you can’t spend until the next budget period.
Reserve Time to Regularly Review Your Budget
It’s likely your income and expenses will change over the course of a year. For this reason, be sure to set aside a time at least once a month to review your budget.
To begin, check to see if you’re staying within your spending limits. Are there categories you can cut back spending in? Do you need some breathing room to spend a little more in one category versus another? Has your income changed? Adjust your budget categories accordingly and revise your goals as necessary.
Fast Fact: In 2022, Americans spent approximately 33% of their regular pay on housing and 17% on transportation according to a Bureau of Labor Statistics (BLS) survey. The next biggest spending category was food at 12%.
Ready to Make 2024 Shine?
As a community-focused bank dedicated to helping our members achieve their financial goals, Chambers Bank offers a variety of banking products and services designed for ease of use and growth.
If you have any questions or you need assistance opening or servicing a Chambers account, please contact our Customer Care Center at 1-800-603-1226 or fill out our inquiry form here.