We’ve discussed budgeting in a few other articles and how it’s the first step to understand your finances and start building your financial fortress. If you know you need to budget but don’t know how to get started, read our steps and recommendations for the best budgeting apps!
How to get started with budgeting:
Do you know what spending is included in a budget? The first step of a budget is to observe your spending your money and categorizing your expenses to better understand and strategize around where your money is going. Our recommendation is to look at the last 6 months of your spending by checking your credit card and account balances to see what you spent.
What are the categories in a budget?
1. Fixed expenses:
This category of the budget includes your needs such as:
- Food: Groceries
- Housing: Rent and/or mortgage
- Utilities: Hydro, water, internet, phone bill
- Clothing and Medical
2. Discretionary expenses:
This category represents your wants which aren’t fundamental such as:
- Shopping for clothes
- Dining out, take out, snacks
- Entertainment: Events, media subscriptions
- Special days: Gifts, celebrations, dining out for holidays and other celebrations such as birthdays, anniversaries, Christmas, Thanksgiving and more
- Other: Any other expenses you spend on wants such as travel and more
Your total for the fixed and discretionary expenses is your monthly budget. If this total is more than you are comfortable with, you can then decide how you will reduce your spending in the discretionary category.
What are some easy ways to cut down your expenses?
Paying off credit cards on time: The average interest rate on a credit card is 19.99%. If you don’t pay off the balance on your credit cards, you will accumulate a significant amount of extra interest you will have to pay. In order to not let your credit card balance balloon, we recommend you devise a plan to pay off the balance as soon as possible.
The rule of 72:
The rule of 72 allows you to calculate how long it will take for your investments or debts to double based on the interest you have. If you divide 72 by the annual interest rate you are paying, you can find out how many years it will take for the interest to double if you continue to make minimum payments. For example, if your credit card has an interest rate of 20%, it will take you 72/20= 3.6 years to double your total credit card debt.
Our Top Budgeting App Recommendations:
- Mint: This free budgeting app allows you to keep all your accounts in one place which lets you see the big picture of your financial situation. If you want to see all your accounts in one place to help track your expenses, we highly recommend this app. However, one downside is the number of ads that come up which might worsen the user experience.
- You need a budget: Similar to Mint, you can put all your accounts together to help you strategize. However, this is a paid application.
- Pocketguard: This paid application is one of our favourites because it helps you ‘guard your pocket. By aligning all your accounts, it creates a budget for you and tracks your everyday spending. To ensure you don’t overspend, it also sends warnings if your activities might push you to debt. The cost is $29.99 USD per year.
- Expensify: If you are a business owner that needs to keep track of their expenses and business receipts, Expensify is the one for you. In addition to gathering all your accounts in one place, you can attach this app to your bookkeeping programs. Once you add your bookkeeping program, the app will match your spending and reconcile it. If your spending includes foreign exchange, Expensify will also convert the currency to align it with your overall account.
- Koho: This free app lets you budget by giving you a prepaid visa card that you can load up for your monthly spending. If you stay within your budget, you get cash reward points that you can use towards your financial goals!
Still need help?
If you feel that you can’t build your budget alone, reach out to our team for a free 30-minute session on how we can help you slay your financial goals!
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