The Best Way to Simplify Your Budget

For starters, make sure the budget is realistic, all expenses must be listed and accurate as possible. Fixed costs such as mortgage payments, insurance, car payments, and other monthly bills are fairly easy to list. Others, such as utility bills and groceries, must be estimated.

Listing the Expenses

Add up all the expenses, being sure not to leave out anything: newspaper subscriptions, morning coffees, movie apps such as Netflix. These seemingly little items add up and must be counted. Subtract expenses from income, and the remaining balance is what there is left to work with.

An Ideal Breakdown of Expenses

If all of your expenses  total 60% of total income or less, then you are in pretty good shape. Greater than 60%, you will most likely have to cut expenses. This 60% allows you to add your remaining 40% to a combination of a emergency fund, retirement, and investing, then all the fun extras.

To make budgeting even simpler, try doing some of the following:

1. Group similar debts into categories so you don’t have such a long list.
2. Pay your bills online through automatic payments. Then you don’t have to worry about whether you forgot a bill or not. You can also have the payment dates changed for many bills so that they can be paid all on the same date.
3. Add money to savings automatically. Many banks let you have the option of automatically moving money from checking to savings on a monthly basis.
4. Don’t use credit cards. It’s too easy to go over budget when using a credit card. Use cash instead.

Spend time once a week going over your budget. Twenty minutes is enough to see if you spent more than usual on groceries or utilities this month, and you can make adjustments accordingly.