Budgeting goes beyond just listing your income and expenses. Done correctly, it is an involved process that forces you to do an assessment of your current financial well-being, think of your financial future and build out a road-map of how to get there.
It is one of the first steps for anyone serious about being financially free.
To be truly financially independent, you need to be intentional and purposeful about your finances – fumbling your way through your spending, saving or investment won’t cut it.
Tracking or detailed budgeting?
To be clear, some people don’t need to keep a detailed budget – the kind that requires giving every dollar a job and tracking every dollar spent.
For example, if you save a good percentage of your income and have a reasonable idea of what you spend, you may not need a detailed budget.
A quick monthly review of all your expenses across your credit/debit cards, bank accounts may be enough.
Most banks now offer this feature in some form through their mobile apps or online banking. For example, the NOMI insights in the RBC app will show you a summary of both inflows and outflows, automatically categorized.
But even if you don’t need a detailed budget, an annual budget to review where you are and how close you are to your financial goals will be beneficial.
You should seriously consider a detailed budget if you:
- have huge debts and are serious about paying them off ASAP
- live from paycheck to paycheck
- are constantly stressed about how to cover a bill, especially those one-off or annual bills
- have little savings or no emergency fund to draw on
- are a freelancer or a small business owner and your income fluctuates
- have just taken a pay cut
- had a major life event: bought a new house, got married, had a baby, etc
- can’t manage your spending and you want to hold yourself accountable
So where to do you start if you fall into any of the categories above?
Related Post: 45 Creative Ways To Save More Money
Best Budgeting Apps
There are several tools available for tracking and budgeting for your expenses – both free and paid.
Many of them link directly to your bank account, automatically downloading your transactions and categorizing them.
You also get some charts, reports, and insights into your spending.
So here are 3 of the best budgeting apps and tools available for anyone ready to start budgeting:
YNAB (You need a Budget)
YNAB is built to be a digital version of the envelope system of budgeting.
It is built around 4 rules:
- Give every dollar a job: Assign all your income to a category. If there’s any dollar left, you can roll it over to another month to create a buffer.
- Embrace your true expenses: In other words, save for rainy days – those infrequent and unplanned expenses. Thinking of going on vacation in November or those Christmas gifts? Start setting aside some money in advance.
- Roll with the punches: Life happens. Things won’t always go according to your plans and you overspend in some categories. Rather than accepting defeat, YNAB encourages you to see this as a normal part of your financial journey.
- Age your money: This means creating a buffer or living on last month’s income. When you live on the previous month’s income, you’ll have some breathing space, stress less about money and ultimately break the paycheck to paycheck cycle
Transactions can be entered manually through the mobile or web app, or pulled in automatically if you link your bank accounts.
YNAB costs $14.99/month (as at March 2023) but you can sign up for a 34 days free trial here.
Mint is a free budgeting tool. Unlike YNAB’s envelope system, Mint calculates your average expenses per category and allows you to create a budget based on your past spending habits.
You can link and view all your accounts in one place; a handy feature especially for those with multiple bank accounts.
Also, you can create a budget for each category, set specific goals and save towards them.
With Mint, you can effortlessly stay in control of your bills with reminders and alerts. You can set alerts for upcoming bills, get warnings for when your funds are low and be informed of unusual, large or suspicious transactions.
Click here to sign up for a free Mint account.
EveryDollar is a budgeting solution from Dave Ramsey’s team with a very clean and intuitive interface. Income and expenses can only be added manually with the free account.
The paid version, EveryDollar Plus, connects to your bank accounts for easier and faster budgeting. It allows you monitor your balances, track your expenses and auto populate your transactions into the app.
It currently costs $79.99 billed annually, with a 14 day trial period.
Spreadsheets are also a popular and easily accessible option. A simple budget can be quickly built on Microsoft Excel or Google Sheet.
The only drawback is you’ll spend more time entering your income and expenses. A workaround is to download your bank statements, paste in the template and classify the transactions.
While this may not be as hands-on as some of the budgeting apps out there, some people prefer the simplicity, flexibility, and ease of use.
And you can easily download a budget template online and customize it to your needs.
So go ahead and start the process, even if you can’t stick to it for the long term, having that honest conversation with a partner or just going through your finances will be of immense value to you.
And when you’re ready to get started, any of the best budgeting apps above are a great place to start.