Find and Compare the Best Budgeting Apps in January 2023

Get to Know Your Spending

When most young people hear “budgeting,” they think “suffering.” This is a total misconception, since having a personal budget actually grants you more freedom, not less. When you have power over your money, you get closer to achieving your financial goals.

The logic of budgeting is know your spending. A monthly budget makes sense of earning and spending. It’s the most basic method of personal financial awareness. At the beginning of each month, you simply write down how much you expect to earn (take home pay and any other income) and how much money you expect to spend. Just by writing it out, you will better understand and control your money.

Monthly budget basics

Your first monthly budget doesn’t have to be complicated. There are two basic questions you need to answer: How much do you plan to earn this month? And what are you going to use it for?

You may want to look at last month’s bank statement to help calculate your monthly income. Once you know what you expect to make, total your “fixed expenses,” or monthly expenses that stay the same from month-to-month. These may include your cell phone and internet bills, rent, student loans, and car payments. Next, determine your “variable expenses,” or monthly bills that aren’t always the same each month. Things like utilities, groceries, credit card bills, and entertainment.

Reviewing previous month’s purchases gives you a general picture of your spending habits. As you become more conscious of your spending each month, you’ll project monthly expenses with more accuracy.

You can just sit down with a pen and paper and make two columns to form a basic, workable budget sheet. And if simplicity isn’t your style, there are tons of useful budgeting tools and apps out there like Mint, Wally, and Goodbudget. Also, a Google or Excel budget spreadsheet can work wonders.

Advanced budgets for advanced lifestyles

As your financial situation becomes more complex, you’ll develop your budgeting strategy. You could use the 50/30/20 Rule, developed by Senator Elizabeth Warren, which organizes your spending into three categories: needs (50%), wants (30%), and savings (20%). Or, you could go with the zero-based budgeting strategy developed back in the 1970s by Texas Instruments accounting manager Peter Pyrrh. With this strategy, you calculate your monthly income and monthly expenses so that your total money at the end of the month is equal to zero. Extra money can go into an emergency fund or savings account.

No matter how sophisticated your budgeting strategy, the basic economic concept remains the same: managing what’s coming in and what’s going out.

 

Budgeting with credit cards

You don’t have to forego credit cards in order to maintain a healthy monthly budget. In fact, the right credit card can be a great asset to a well-managed monthly budget if it helps manage your cash flow and earns rewards. Using a credit card responsibly also helps to improve your credit score so that you can finance some of the most important future purchases, such as a home or a car.

For the budget-conscious person, some cards are better than others. You want to look for credit cards with generous rewards, nice perks, and low fees (all four of these cards have a $0 annual fee). The best budget-friendly credit cards we’ve found include:

Discover it® Cash Back Card

With this card, Discover matches all your cash back earnings at the end of your first year, making the already excellent 5% rewards twice as nice. It’s one of the most generous cash back credit cards available.

U.S. Bank Cash+™ Visa Signature® Card

You get 5% cash back on two categories of your choice, 2% cash back on one everyday category like gas stations or groceries, and 1% cash back on all other purchases. Depending on how you plan to spend, the Cash+™ Card could help you manage your money.

Bank of America® Cash Rewards Credit Card for Students

If you’re a college student, a student credit card is a great way to get some nice rewards and begin to build credit. This card gets you cash back rewards in two categories of your choosing, 2% back on grocery purchases, 3% cash back in another category of your choice, and 1% cash back on all other purchases. Plus, if you spend $1000 in your first three months, you’ll get $200 in cash rewards.

Wells Fargo Cash Wise Visa® Card

This card gets you unlimited 1.5% cash back on all your purchases, no categories to worry about. It also comes with an amazing 0% intro APR for 15 months, and a $150 cash reward when you spend $500 in your first three months. If you’re looking for a credit card with clear and simple rewards, you can’t do much better.

The power of budgeting

You can still get what you want on a budget. A monthly budget is not a sacrifice so much as a method to take control of your money. When you understand your money and how to manage it, you’ll actually get more of what you want because you’re getting less of what you don’t. If you start practicing good budgeting habits now, the skills will help you in every stage of your life.

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