Let’s face it, most of us hate budgeting. It ranks right up there with traffic and taxes (more on that to come). We all know at least one person who likes crunching their expense numbers and spreading out their Excel sheets. For fun, let’s call them Count von Count. Count knows where every penny goes, I guarantee it, but for the bulk of the population, things are a bit fuzzier. It’s like keeping a food diary to lose weight – it quickly becomes a dull chore. Luckily there are some #lifehacks and FinApps (cue eye-roll) that free us from the oppression of spreadsheets and calculators.
First off, the #hacks. One of my favorites is a rule of thumb called the 50-20-30 rule. The gist is as follows: 50% of your take-home pay is slated for fixed cost necessities (rent or mortgage, insurance, utilities, transportation, food, telephone, etc.). 20% is aimed at savings or financial goals (paying down debt, emergency fund, travel fund, house down payment fund, and so on). Notice that we’re using take-home pay, so any money that goes into your work 401k isn’t included in this number, which means you may end up saving over that 20%. Squadddddd.
The remaining 30% is discretionary. All up to you. Get yourself a haircut (you hippie); Blue Bottle Coffee (pls sponsor me); buy a new smartphone without a cracked screen; a Netflix account so you can stop using your friend’s; it’s about time you get a PRIME membership; etcetera; etcetera.
That’s it. Just kick back and divvy up your check to cover those three categories. Ideally, you should automate as much of these as you can (particularly the savings portion) so that budgeting takes care of itself. That’s where solid budgeting applications take the wheel. Disclaimer: I’m not sponsored by the apps I’m about to recommend, but I use them in my day-to-day and can vouch for them 100p.
consolidates your credit cards, bank accounts, bills, etc. into a single intuitive platform. Mint lets you know when bills are due and sends you payment reminders so you can avoid late fees. You can create a budget on the app (follow the above rules) and based on your spending habits, Mint even gives you specific advice to gain more control over that budget. The free credit score is a nice bonus, too.
If you are an investing novice, Acorns is the best way to utilize the benefits of automating your new financial good behavior. Every time you make a purchase with a card connected to the app, Acorns rounds it up to the next dollar and automatically invests the difference in a portfolio of low-cost exchange-traded funds (ETFs) that you select based on your risk preference. (I’ll go in depth into ETFs in future posts, stay tuned!) Acorns puts your pocket change to work earning real returns that will ultimately add up to serious $$ come retirement. The service is free to college students and charges just $1 per month for pretty much everyone else.
The more you automate the less you have to scribe in dusty ledgers or strain your eyes with spreadsheets. Except for Count von Count who finds that sort of thing fun. Oh, one more thing. It’s a good idea to check your bills about once a quarter or at least twice a year to look out for bill creep (“free trials” I’m talking about you). And checking your auto and homeowners or renters insurance every two years may save you money as well. Keeping those slippery bills under thumb can save money for the important stuff (Stranger Things anyone?).
Special thanks to my mentor, John Conroe CFP®, for collaborating on this post. He happens to be a very talented financial planner and author; check out his novel series at johnconroe.com and on Amazon.