Best Ways to Budget personal finances

The 50-30-20 rules are the best rule that allows you to divide your income for necessities, savings, and happy hours. It reflects the distribution as 50% of your money goes towards buying the necessities and paying bills, 30% goes towards happy hours that means eating at restaurants, buying luxury items, etc. and the remaining 20% of your income goes to savings. This moderate budget allows you to have fun, and save at the same time!

Every month you need to spend a fair bit of budget on the essentials. These essentials are things that you absolutely have to pay for every month. Start with the rent, food and medicine, clothing, and transportation. Once you have these payments reserved, you can start filling in the gaps with other luxury expenditures.

Making a budget is easy and you can do it in minutes but sticking to the same budget is the hard job. You cannot stick to a $200 weekly budget if you spend $400 per week. To make a budget that you follow, you need to keep realistic expectations from yourself. A budget is supposed to help you recognize where your money is going, so make a budget that is not much different from the way you spend money. If you really want to cut down your expenses, cut down 10-20% expenses. 

More often than not, you're living in a shared space with other family members like your siblings, spouse, kids, etc. If so, the best option is to have them sit alongside you while you're drafting the budget. The family needs to be on the same page with money and, more importantly, everyone needs to contribute to state the things that will cost money that month. If you're single and living alone, don't finalize the budget in one sitting. Create a draft and edit it over the course of the next week. You might periodically remember things that you forgot before.

If you expect that you might lose your job or you don’t have an emergency fund to deal with an unpleasant financial situation, you need to try the bare-bones budget. Staying on the bare-bones budget for the entire month can be a difficult job but staying on it for a week is easier.

The bare-bones budget allows you to spend money on the most immediate needs only. Which means no spending on wants and demands. You can spend money on monthly bills, food items that are necessary, and all the other expenses that are a must. You will have to skip spending money on all kinds of entertainment such as eating out, going to the movies, and shopping for clothing. The goal here is to save as much money as possible so make sure that you try your best to avoid spending money. 

There are a number of budgeting tools and saving apps that let you track your spending and inform you that you are overspending when you reach the limit. When you are on a strict budget and are trying to save for a new car, a holiday trip or to invest, keep your goals in mind whenever you stumble across the Instagram ads. Keep checking your budgeting app to see your progress.

Budget cuts aren't necessarily a bad thing. A lot of folks tend to frown upon the concept of budget cuts and find it extremely derogatory to cut back on things they've always spent money on. A budget cut is only temporary and can easily be altered in the coming month. If you're facing issues in your budget, stop dining out so much, buy clothes from a cheaper store, cancel your Netflix subscriptions. These small cuts can go a long way in setting you back at the right pace.

Writing down the expenses of the previous month can help you understand how you are spending your money. We often spend too much money unknowingly when we go out and forget to write it. To realize where your hard-earned cash went last month, write down what you spent last month and where. You’ll probably get a lot of motivation and lessons for budgeting from listing down the expenses.