Let’s look at the basics of creating a spending plan to manage your money wisely.

What Is a Budget?

A budget is your plan for what you will do with your income. Some make a basic budget that simply compares their income to expenses to avoid overspending. Others make detailed budgets that assign a specific purpose to each dollar. Each person budgets differently, but almost everyone finds that a budget is one of the most effective money management tools.

How to Budget Money: The Beginner's Guide

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Further reading: How Much Can You Save in a Year?

How to Start Your Budget

Making your first budget takes a few minutes by following this step-by-step approach. You can create a budget using pen and paper, a spreadsheet or a budgeting app.

Step 1: Calculate Your Monthly Income

List any income you earn from your day job, side hustles and investments.

If you earn a variable monthly income, list your base salary using the average number of hours you work or commissions that you receive.

Step 2. List Your Monthly Expenses

The next step is writing down your regular monthly expenses.

Some of the common monthly expenses include:

• Rent
• Utilities (i.e., electricity, water, gas and trash removal)
• Groceries and restaurants
• Commuting expenses
• Insurance 
• Entertainment
• Phone, internet and cable tv services
• Loan payments
• Charity Donations

The best way to determine your monthly expenses is to write down everything you spend for a month or more before setting up your budget. Many people who try detailed expense tracking for the first time discover spending that they were hardly aware of, and it can be substantial.

110 Budget Categories to Help You Start Your Budget

Step 3: Reduce Expenses and Assign Spending Targets

The primary goal of any budget is to spend less than you earn. First, compare your expenses to your income. If you spend more than you make, look for ways to spend less money to balance your budget.

Once you bring your spending under your income, continue looking for ways to spend less on unessential purchases. The bigger the gap between your spending and your earnings, the more you can set aside.

After reducing your expenses, set a monthly spending limit for each category. You can assign a specific dollar amount or a percentage of your income.

Step 4: Make Savings Goals

Assign a savings goal to any extra income you have each month. You can divide your savings into short-term and long-term goals.

Some common goals include:

• Retirement savings. If your employer offers a 401(k) plan it’s important to contribute, especially if your employer has a matching contribution program. That’s free money!
• Building an emergency fund. Many experts suggest an emergency fund that can support you for three to six months. An emergency fund can help you handle unexpected situations without going into debt.
• Specific savings goals. You may want to save money for a vacation, a desired purchase, a down payment on a house or car, or something else.

Once you’ve set and prioritized your savings goals and budgeted an allocation for each goal, decide where you’ll save the money for each purpose. Our guide on saving money should give you an idea of where to put money allocated to different goals.

Step 5: Have Budget Review Sessions

Set aside 15 minutes each week to compare your actual spending to your planned spending. Make adjustments as necessary to look for ways to spend less in other budget categories to offset the expenses that you cannot reduce.

In the beginning, you will probably find that your budget needs some adjustments. That doesn’t mean you failed at budgeting, so don’t be disappointed. A budget is a living document that evolves to fit your needs, and almost everyone takes some time to find the formula that works best for them. Stay with it!

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Different Budgeting Strategies

There are several different budgeting methods you can use to track your income and expenses. Budgeting isn’t rocket science, but having a complicated budget can cause you to give up in frustration. A budgeting strategy will help you focus on the details and build a budget that works for you.

Here are some of the most popular strategies that you can pursue. No one strategy is right for everyone: you’ll have to choose the one that suits your situation and your goals!

Zero-Based Budget

A zero-based budget assigns each dollar you earn to a specific expense or savings goal. This budgeting strategy lets you know exactly how much you spend on each expense, savings goal and debt payment.

One downside of zero-based budgeting is planning for variable expenses like gas, repairs or electricity bills. Make your best estimate and transfer any money you don’t use into savings for a more expensive month. There will be unplanned purchases each month, so set aside some cash for a miscellaneous purchase category.

The zero-based budget is a good strategy for people with consistent, predictable earnings and expenses. It may not be the best choice if your income and expenses vary widely each month.

50/30/20 Budget

You may prefer to assign a percentage to each expense type. The 50/30/20 budget rule recommends dividing your after-tax income into these expense types:

• Needs, including minimum monthly debt payments (50%)
• Wants (30%)
• Savings, investments and extra debt payments (20%)

Within each category, you assign a spending amount for each need, want and savings goal.

The 50/30/20 rule can give you more spending flexibility than a zero-based budget. However, if your needs consume most of your income, you must sacrifice your wants and savings goals. You might have a 60/20/20 budget until you can reduce your necessary expenses or boost your income.

Envelope System

The envelope budgeting system, also known as cash stuffing, lets you assign a specific dollar amount to each expense or savings goal. If you use cash regularly, you can label a physical envelope for each category and fill it with money. Once you use the envelope funds for that month, you don’t spend any more on that category until the next month.

If you use debit cards or credit cards to pay for purchases, there are several envelope-based budget apps. You can create virtual envelopes and track spending from your phone to avoid overlooking any card purchases or bank withdrawals.   

Assigning a certain amount of cash to each budget category can help you avoid impulse spending.

Values-Based Budget

People who know budgeting is important but don’t want to follow a traditional formula should consider a values-based strategy. This budgeting strategy can help you enjoy life each month.

After paying your essential bills, you dedicate your remaining income to the expenses that are most important to you. If fitness is important to you, you may decide to spend your extra cash on exercise equipment or home workout essentials. Frequent travelers may choose to use their funds to go on trips more often.

One potential downside of values-based budgeting is not saving enough for future expenses. You will need to find a balance between near-term pleasure and planning for the future.

Budgeting Tools

Using a free or premium budgeting tool can make it easier to track expenses and your goals. There are many popular apps designed to assist you with building and following your budget.

You Need a Budget

You Need A Budget (YNAB) is a great choice if you want an in-depth budget. YNAB walks you through the entire process and enters your average costs for many ordinary expenses.

Couples can also benefit from using YNAB as multiple devices can access the app in real-time to track spending and update budget progress.

Tiller

Those who prefer spreadsheets will like Tiller. This app links to your bank accounts and payment cards. Your transactions can auto-categorize and export to Google Sheets and Microsoft Excel. Tiller offers spreadsheets for several different budgeting strategies.

Goodbudget

Consider Goodbudget if you want to use the envelope system. You can create virtual envelopes and sync your budget with multiple devices. Goodbudget also tracks your debt payment progress.

Free Monthly Budget Spreadsheet Template

• This simple monthly budget template makes budgeting fun and exciting.
• Easy-to-follow instructions so you can get started budgeting in no time.
• Access your budget online from anywhere. See all features

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Budgeting as a Couple

Making a successful budget as a couple requires more effort than budgeting alone. These tips will help you succeed.

Discuss Wants and Goals

Sharing a common vision is vital to budgeting as a couple. When making a budget, sit down together and review the essential expenses, wants, and savings goals.

Using a budget app for couples can also be helpful. Many premium apps sync with multiple devices. Apps like Honeydue offer a joint bank account and budget templates and let couples chat in-app to categorize transactions.

Discuss Large Purchases Before Hand

Couples can avoid money stress by discussing expensive purchases above a specific price. Small purchases don’t need mutual approval as the budget should allocate some cash for each person for personal spending.

Schedule a Joint Review Session

In addition to communicating about large purchases, couples should schedule a weekly or monthly review session.

Many premium apps provide reports that can make reviewing transactions easy.

Why Make a Budget?

A budget makes it easier to see how you spend your money each month. Comparing your income and expenses can help you quickly decide if you can afford a purchase. Budgeting also makes it easier to determine how much you need to save each month for specific short-term and long-term money goals.

A budget can help you stop living a paycheck to paycheck lifestyle. Living paycheck to paycheck is risky: if you have unexpected expenses or you’re suddenly out of work, you may not be able to pay the bills. That can mean late fees, high interest rates on credit card balances, and lasting damage to your credit. A budget can help you build reserve funds and break out of the paycheck-to-paycheck lifestyle.

How Much Can You Save With a Budget?

Saving money is possible with almost any budget. You won’t know how much you can save until you analyze your spending patterns and set up your budget. Once you know how much you’re spending, you can set goals and choose ways to reduce your spending or increase your income to meet them.

For example, you might decide that you want to set aside a specific amount, such as $100 a month. Some ways to produce an extra $100 a month can include:

• Cooking your meals instead of ordering takeout
• Canceling unwanted subscriptions
• Reducing entertainment spending
• Adding a roommate to share the rent

Once you’ve decided how much you want to save and how you’re going to save it, you can build a budget that supports those plans.

How to Stick to Your Budget

Making a budget gets you only halfway to your goals. The other half is following your budget, and for many people, it’s the harder part. Choosing the right strategy and using the right tools can make it easy to follow your budget. These practices can also motivate you.

Start With Small Goals

Make small and easy to achieve money goals. Create more challenging goals as your finances and money skills increase.

Use One Bank Account

Only using one bank account to pay your monthly bills makes it easier to track every expense. Having an accurate budget that tracks all of your income and expenses is essential to know if you’re living within your means. If you use a single account, your account statement can serve as a summary of your spending.

Automate Savings and Investments

To avoid accidentally spending your savings, schedule automatic transfers to your savings accounts and investment accounts. If you’re saving for a future purchase, consider making a special fund specifically for that expense.

Use Financial Calculators

Free online financial calculators can help you estimate how much money you need to set aside each month for your various goals. You can find calculators for these purposes:

• Paying off debt early (i.e., credit cards, student loans, home mortgage)
• Refinancing loans
• Saving for retirement
• Estimating investment returns

Calculators can remove the guesswork and keep you focused on your goals.

Make a Shopping List

If you’re prone to making impulsive purchases, make a shopping list before going to a store or website. Only add items to your cart if they are on your list.

Set Daily and Weekly Spending Limits

Spending limits for your unplanned purchases can help you avoid overspending. When you spend too much, you must reduce spending on your other non-essential purchases. You might also decide to wait at least 24 hours before making any purchase over a certain amount. Waiting time can help you avoid impulse purchases and decide if you really need to make that purchase this month.

Pay Cash for Large Purchases

When possible, use cash and avoid borrowing money or using installment plans to make large purchases. Taking on debt adds another monthly payment to your spending. Most loans charge interest that increases the total purchase cost and reduces your disposable income. If you use a credit card you will have to pay that balance off in full or face an extremely high interest rate.

Avoid Hidden Fees

Small hidden fees that banks and other services charge erode your free cash. Look for free bank accounts that don’t charge monthly account fees or ATM withdrawal fees.

Set due date reminders to avoid late fees for your recurring bills and loan payments. Some merchants offer a discount when you link your bank account to send payment on the same day each month.

Building a budget and sticking to it are core elements of any strategy for financial success. Budgeting allows you to control your spending and generate surplus funds every month. That opens the door to saving, investing, and long term prosperity. It all starts with a budget, and if you don’t have one, you need one!

The post How to Budget Money: The Beginner’s Guide appeared first on FinMasters.

Why It’s Important to Keep Car Costs Down

Cars are one of the highest expenses in the typical consumer’s budget. In 2021, the average household spent $10,509 on auto expenses. That’s 16% of their total spending and the second-highest line item after housing.

To put that into perspective, that’s about $875 per month. If you started investing that into the S&P 500 at age 21 instead of spending it on a car, you’d have around $400,000 saved by age 40, assuming an average real return of 6.65%.

It might be unrealistic to forego a car altogether, but even marginally reducing your monthly auto expenses leads to significant savings.

As you can see, cars massively impact your ability to save and invest money. Buying more car than you can afford can make it difficult to invest or even save an emergency fund.

It can also leave you with bills you can’t pay and no savings to fall back on. That can even lead to repossession, which can crush your credit and leave you with no way to get around.

Unfortunately, because we expect to spend hundreds of dollars on car payments each month, we often don’t realize how much a car costs us.

How Much Should You Spend on a Car?

Fortunately, figuring out how much you can afford to spend on a car is pretty straightforward. The best way is to work backward from your income, savings, and budget. Here’s how to do that for the initial and recurring costs of having a car.

Car costs fall into two categories: upfront costs and recurring costs. You need to consider both.

How Much You Should Spend on a Car Upfront

Whether you use financing to buy your next car or not, you’ll probably spend a lot of cash upfront. It’ll go toward expenses like your down payment, sales taxes, and registration costs.

Generally, the initial outlay should be low enough to avoid dipping into your emergency fund, which should be at least three to six months of expenses.

If you spend your emergency savings to buy a car, you put yourself in a precarious financial position. Not only are you eroding your financial safety net, but you’re also increasing your fixed expenses. If something goes wrong, you’d have to go into debt to meet your obligations…

Many dealers will offer financing with no down payment. This may seem like a good deal, but it usually isn’t, especially when it’s combined with a long loan term.

Cars depreciate fast, and with no down payment and a longer loan term, you will almost certainly owe more than your car is worth for much of your loan term. That means extra insurance costs and big problems if you need to sell or refinance your car.

How Much You Should Spend on Recurring Car Costs

General financial wisdom recommends spending no more than 10% to 20% of your take-home pay on transportation.

For example: If you earn $4,000 each month after taxes, you’d want to keep your monthly auto expenses between $400 and $800.

Personally, I’d strongly suggest that you stick to the bottom of that range or lower, if possible. You typically need to save at least 15% to 20% of your income to retire in 40 years, assuming you invest your savings in a healthy portfolio and plan to withdraw the standard 4% per year in retirement.

If you start saving late or want to retire early, you’ll need to save even more than that to reach your goals. Spending 20% of your paycheck on your car makes that challenging.

Only you know how much you can spend on a car each month and hit your desired savings rate. If you want to allocate 10% more of your monthly budget to your car, that’s fine. Just know that you’ll have to make sacrifices elsewhere to make up for it.

Pro Tip: Test your ability to afford a car by putting the amount you plan to spend each month into a savings account for a few months. If that negatively impacts your quality of life or you struggle to make the payment, lower your estimated car budget.

How to Calculate the Cost of Buying a Car

To decide whether you can afford to buy a given car, you need to compare the upfront and recurring costs of doing so to your budget. Whether you’re paying for the vehicle outright or using an auto loan, follow these steps to estimate those amounts.

1. Choose Your Down Payment

If you’re buying your car with cash, you can note your car’s purchase price and skip this step. If you’re going to finance your car, you need to decide the percentage of your vehicle’s value you want to put down upfront.

Down payments typically aren’t required when you finance a car. However, they’re a good idea to provide anyway since they can significantly reduce the interest you accrue over the life of your auto loan.

2. Estimate Your Other Upfront Costs

In addition to the down payment on your vehicle, you may also incur the following expenses when you first purchase your car:

• Sales taxes: States and localities often impose a tax on transactions that involve the sale of tangible goods, including cars. Rates vary depending on where you live, but you can usually expect to pay between 5% and 10% of your car’s price.
• Dealership fees: If you buy your vehicle from a dealer, you’ll incur miscellaneous fees, such as documentation fees, destination charges, and advertising fees. These vary between states but can be as much as 8% to 10% of your car price.
• Title and registration fees: Even if you purchase your vehicle from a private party, you’ll usually still need to pay some fees to process the paperwork for transferring ownership. These also depend on where you live and can be anywhere from $50 to several hundred dollars.

If you already have a car and plan to buy your next one from a dealer, you can trade in your previous vehicle to reduce your purchase price by its value. That also reduces your sales taxes in many states, as you usually only have to pay them on the difference.

3. Determine Your Interest Rate

When you finance a car, your auto loan is your highest recurring vehicle cost. As a result, you’ll need an accurate estimate of your prospective monthly payment to determine whether you can afford to buy a car.

The first step is to find your interest rate, which primarily depends on your credit score. Here’s what you can expect to receive in 2023:

Of course, these are only averages, and you may receive offers for much higher rates from some dealerships. Because they outsource these loans to third-party lenders, they often mark up the rate so they can pocket the difference.

To protect yourself against this scam, get prequalified before going to a dealership. That’ll help you assess the reasonableness of each offer and give you more leverage to negotiate with dealers.

Learn More: The Great Auto Loan Scam: How Not to Be a Victim

4. Set Your Repayment Term

The second primary variable in calculating your monthly loan payment is the length of your repayment term. They’re usually available in 12-month increments and range from 24 to 84 months.

Extending your repayment term can lower your monthly payment, and many car dealers will try to offer you a long-term auto loan to convince you that a more expensive car fits your budget. However, setting a lengthier term raises your total interest costs and increases the chance of being upside down on your car loan.

The lengthiest repayment term you should reasonably accept is 60 months. If you can’t afford the payment for a car with a loan that long, then you probably can’t afford the car.

Learn More: Are Long-Term Auto Loans Worth It?

5. Estimate Your Other Recurring Costs

Your loan payments will be your highest recurring expense when you finance a car, but you’ll also incur several other significant costs. Here are the ones you should factor into your calculations:

• Gas: Use your vehicle’s miles per gallon (MPG) and your local gas prices to project how much you’ll spend on gas each month at your expected driving levels. Consider adding a 20% cushion, as these variables all fluctuate.
• Parking: Depending on where you live, you may have to pay monthly fees to park your car. Apartment complexes often collect fees for parking in their garages, while cities may charge you for street-parking permits.
• Insurance: All states except New Hampshire require auto insurance. Rates depend on several factors, including age, location, driving record, and vehicle type. Get personalized estimates from several providers to estimate your costs.
• Maintenance: Maintenance costs also vary between vehicles. You can use tools like Repair Pal to get a breakdown of what you can expect for various makes and models.

With that, you should have everything you need to estimate the upfront and recurring costs of buying a car. To get help putting it all together, use our auto loan calculator to do some of the math.

Should You Lease a Car Instead?

The financially responsible way to get a car is to pay cash for a reliable vehicle in your budget with low maintenance costs and good gas mileage, then drive it into the ground. Unfortunately, many people are reluctant to do this.

I won’t speculate on the merits of their reasons here. Just know that if you don’t take that approach, the question of buying or leasing a car becomes more difficult to answer. In fact, a comprehensive discussion is beyond the scope of this article.

However, buying is generally more beneficial the longer you plan to hold onto your vehicle. Leasing becomes more attractive if you plan to switch out your car for a new one on a regular basis.

However, leasing means committing yourself to shell out hundreds of dollars or more each month to maintain access to a car. It’s a luxury, not a sound financial decision. I wouldn’t recommend it unless you’re so wealthy that you have money to burn.

Avoid Stretching Your Budget For a Car

Having a healthy savings rate is the best thing you can do for your finances. The wider the gap between your income and expenses, the faster you’ll be able to progress toward your financial goals, whether that’s paying off debt or saving for retirement.

Since transportation expenses are the highest line item in the typical consumer’s budget after housing, keeping them as low as possible is one of the most effective ways to boost your savings rate.

Do yourself a favor and buy a car you can easily afford. If you’re not sure if you can afford the car you’re looking at, consider a cheaper one or a used car.

An affordable car can give you a significant financial advantage over most households and help you avoid the nightmare of missing your car payments, damaging your credit, and having your vehicle repossessed.

The post How Much Car Can I Afford to Buy? appeared first on FinMasters.

Saving on Groceries

On average, the annual costs of feeding just one person in the US can range from $2,400 to well over $4,000, depending on where you live. If you need to identify saving opportunities, groceries are where you should start, as they’re likely one of your most significant monthly expenses^[1].

Of course, that doesn’t mean you should stop indulging in some of your favorite treats or reducing your grocery budget to the point where you’ll have to go through forced fasting at the end of each month.

Instead, try some of the following tips to reduce your grocery bill and supercharge your savings:

1. Create a Grocery List and Stick To It

Making a shopping list and sticking to it is a silly hack that works surprisingly well and even better when you commit yourself to meal prepping. Plan out all your week’s meals in advance, check your pantry to see what items you already have, then create a list of any additional things you’ll need. Most importantly, don’t deviate from the list!

2. Use Your Credit Card

If you have a rewards credit card, don’t save it for occasional larger purchases. Use it for your daily grocery expenses. Many card issuers offer fantastic cash-back and other rewards you can earn by using your card on things like groceries, gas, and even eating out at a restaurant.

Just be sure you can pay off your card in full every month. Otherwise, the rewards will quickly be eaten up by your interest payments…

Check out the best credit cards for groceries, offering high rates of cash back on top of other valuable perks and rewards.

3. Watch Out for Brand Loyalty

Brand loyalty can hold you back in more ways than one. There’s no real need to buy brand-name cereal, for instance, if you can get generic ones for a much more affordable price. Secondly, making your favorite discount store your one-stop shop for all your groceries is not always in your best interest.

Different stores will have different discounts and special offers at different times. Shop around until you find the best prices for the items you need.

4. Analyze the Sales Cycle

Everyone knows chocolate is cheaper the day after Valentine’s Day, and a similar trend exists year-round. For instance, you’ll often find the best clearances and sales after major holidays.

Many grocery stores will lower their prices at the beginning of each month to attract customers who’ve just been paid. Analyze the sales cycle of your favorite grocery stores and use that information to your advantage.

If you want to know the best days to shop for deals in the US, we’ve got you covered. Check out our list of the best days to shop to score some serious savings.

5. Buy in Bulk When It Makes Sense

Many of us assume that a bulk buy is cheaper, but that’s not always the case. Your phone has a calculator, and with a few quick calculations, you can figure out which products really give you a better deal for buying in bulk.

Be careful about bulk purchases of perishable goods. Buying something and throwing it away is never a good move!

6. Reduce Waste

American households throw away large amounts of food that they have paid for. Plan your meals carefully and learn to use leftovers before they spoil. Throwing away food is throwing away money!

Saving With Utilities

Even if you live in a lower-cost-of-living state, your utilities take a large chunk out of your budget. As a general rule of thumb, the best ways to reduce your utility costs include hefty investments – installing new insulation to keep the heating and cooling costs down, getting new energy-efficient doors and windows, or investing in solar panels.

While all of these certainly reduce your electricity costs, they’re likely out of the question if you’re working with a tight budget.

Some of the more affordable options for saving on your utilities include:

7. Know When to Keep Your Window Shutters Closed

If you have windows with air leaks, your heating and cooling costs will slowly rise. While the best solution would be installing new, more efficient windows, you can reduce your utility bills by knowing when to close your shutters.

During the colder months, keep your shutters closed at night to prevent heat loss. In the warmer months, keep them shut in the daytime to prevent the hot outside air from coming in.

8. Replace Your Air Filters

Your HVAC system has filters to remove all the dust and other small particles from the system. These filters can get clogged up relatively quickly, reducing the efficiency of your heating/cooling units. 

To keep everything running smoothly and prevent your heating and cooling appliances from wasting too much energy, remember to replace your air filters regularly.

9. Pull the Plug!

Even when they’re not in use, many of your appliances drain electricity when they’re plugged in. Your microwave, coffee machine, TV, phone charger, and other appliances still use the so-called “vampire power” when you’re not using them, so remember to unplug what you aren’t using. While this trick won’t save you thousands, it can help give your savings a bit of a boost in the long run.

10. Change Providers

Your phone provider might not be giving you the best deal you could have, so don’t be afraid to change providers if necessary. Shop around to see what pricing others offer, then compare and contrast. However, before you make the switch, ask your current provider if they can get you a better deal than their competitors are offering.

Bill negotiation services can help you save thousands on your monthly bills for a low fee. Here’s a list of some of the best bill negotiation services.

11. Get Help

The upfront cost of major energy-saving improvements may seem prohibitive. Energy efficiency tax credits and rebates can help you cover the cost, and in some cases, can even cover the entire cost of reducing your utility bills.

Saving With Home Maintenance

Whether you own or rent, you’ll have to handle some home maintenance needs yourself. While there’s no going around investing in new appliances once the old ones have run their course, there are a few things you can do to save on home maintenance. Take a look:

12. Prevention is Key

As with most things, prevention is key to saving on home maintenance. It’s much more difficult (and expensive!) to fix a burst pipe than it is to invest in regular pipe cleaning, for instance. It’s more difficult to replace your HVAC system than to prevent damage by regularly replacing air filters.

Don’t ignore the first signs of trouble you notice, whether it’s a small wet spot on your wall or the first sign of mold on your ceiling. Invest in regular inspections and maintenance if you want to save money in the long run.

13. Learn When to DIY

Do-It-Yourself (DIY) projects are extremely popular nowadays, which you’ll quickly notice if you spend any time at all on Pinterest. However, while it might initially seem more financially savvy to do as many things as possible around the house by yourself, it’s not always so.

Not only do some projects require expensive tools and equipment, but they require experience as well. You’d risk wasting money on the necessary tools and hiring professionals who will inevitably have to fix the mistakes you may make, so choose your DIY projects carefully.

Get ready for a chuckle as you discover these weird ways to save money, which are more amusing oddities than genuine advice.

14. Hire Professionals

If your home needs major fixes, such as replacing the roof and flooring, retiling the bathroom, and more, it’s in your best interest to hire experienced professionals, even if they’re more expensive. Cheap handymen and amateurs recommended by your loved ones can make mistakes you can only fix with professional help.

To save money, cut the middleman and always go for high-quality services.

Saving on Shopping

Just because you’re on a budget doesn’t mean you shouldn’t treat yourself to a new pair of sneakers or get rid of that 10-year-old winter coat and get a new one. Still, whether out of want or necessity, there are plenty of ways you could save while shopping:

15. Buy With Cash

There are benefits to shopping with your credit card. You can earn rewards, increase your credit utilization ratio, improve your credit score, and more. However, if you tend to splurge when you’re using your credit card, start shopping with cash only.

Allocate a specific sum for your shopping spree and leave your card at home. You’ll find it easier to buy only what you need without making impulse decisions.

Learning how to use credit cards wisely is an essential skill to master to manage a budget and build wealth over time. Here are 11 rules on how to use credit cards wisely.

16. Invest More in High-Quality Items

$20 shoes may seem like a bargain at first, but chances are that they’re of low quality and will barely make it through one season. Before long, you’ll find yourself in need of new shoes once again.

If you want to improve your savings, splurge a little more on high-quality shoes, clothing, and other items that will easily last you for years to come. Moreover, don’t forget to clean and maintain them well if you want to get the most out of them.

This strategy has limits. Paying more for quality items that will last is a good idea. Splurging on overpriced luxury brands generally isn’t.

17. Sell Used Clothing or Trade It for New Items 

Selling your used shoes, clothing, and accessories is a great way to earn some money on the side – it’s also a great way to refresh your closet. While most online and offline stores for selling used clothing typically exchange your items for cash, many will also allow you to trade them for others’ used items.

If you need new (gently-used) winter coats, business attire, shoes, dresses, and more, consider exchanging some of the things you no longer use.

18. Don’t Buy Things Just Because They’re on Sale

Perhaps the best tip to help you save while you shop is to avoid “great deals” solely because they’re on sale. If you didn’t go to the store specifically to get that item, don’t buy it because it’s on a discount. If you buy a $30 item that you don’t need because it’s on sale for $10, you didn’t save $20. You spent $10.

Saving With Entertainment

When trying to save some cash, most people sacrifice experiences that bring joy: no more Netflix and HBO, concerts, music festivals, and visits to the cinema. While you can certainly reduce your expenses by cutting out expensive entertainment, there are a few better ways to save and still enjoy yourself:

19. Join Community Events

Many neighborhoods have community events you could join without spending a dime, like free movie screenings, game nights, and even concerts. Check out what free events are happening in your area, then get some friends to accompany you. If your neighborhood doesn’t have community events, you can rest assured that your local library does, so see what’s on offer there.

20. Share Passwords

Password-sharing online is generally a big no-no, but if you’re in a pinch, there’s nothing wrong with sharing your Netflix password with your friend and having them share their HBO password with you.

Most streaming services allow for more than a single user, so spread your favorite platforms across your friends and loved ones. You can each cover the costs of a single streaming service and enjoy all their combined benefits.

21. Look for Free Entry Options

Many museums, galleries, zoos, and aquariums offer special deals on occasion, either giving discounted pricing on tickets at certain times of the day or offering free entry. Take advantage of these deals and have a fulfilling day without spending much money.

You might even earn free admission to some exhibits through your bank. Bank of America, for instance, has a “Museum on Us” program that gives clients free access to some museums.

More savings ideas: Here are some of the best ideas to help you discover cheap things to do on weekends.

Saving With Personal Care

Personal care and hygiene products and services can deliver a heavy blow on your budget, so it always helps when you have a few simple hacks to cut back on such expenses. While the following tips won’t help you save for a down payment on a house, they can help you add a few dollars to your piggy bank:

22. Use the Services at a Local Beauty School

If you use bleach and chemical treatments on your hair, going to a good salon is always the best bet. However, if you have a simple hairstyle and need just a basic trim and cut or want cute nail extensions every now and again, see if you can use the services at your local beauty school. Most schools will have much more affordable pricing since the students are still honing their skills.

23. Always Test Products Before Buying Them

There’s no greater waste of money than buying a foundation that’s not your shade or investing in a new expensive face cream that causes you breakouts. It’s always in your best interest to test products before buying them. Bonus points if you collect a few free samples and experience the product’s effect over continued use before investing in it.

Use Every Bit of the Product Before Discarding It

Whether it’s shampoo, liquid soap, foundation, or lipstick, it can be tricky to use up every last bit of product. Tricky but not impossible. Use a lip brush to reach what’s left of your lipstick. Turn your shampoo bottle upside down and let gravity do its work.

Cut your foundation in half and scrape up what’s left of it before throwing it out. You’ll get at least a few more days of use, which can quickly stack up over time. You paid for it, so use it!

Saving on Outings

Having fun and going out with friends are vital for your physical and emotional well-being. You can’t just lock yourself at home to save money. However, you also don’t have to spend a small fortune whenever you meet your friends. Take a look at some tips that will help you save money and still spend quality time with your loved ones:

24. Host Potlucks

Going out to restaurants is convenient but expensive. To get a similar experience, enjoy a chance to hang out with friends, and save some money, you should try hosting potlucks. With potlucks, everyone brings a single dish to share with others. You’ll be responsible for making just one simple dish, and you’ll still introduce some variety to your diet.

25. Plan Ahead

If you have friends who like to spend on your outings and who prefer going to more expensive locations, your best course of action would be to plan ahead. There are two parts to this. The first one is setting a budget aside for outings with friends.

Just like you would set aside money for utilities and bills, create a unique fund for outings. The second part of planning ahead is beating your friends to the punch and inviting them to free/cheap activities before they invite you to their more expensive alternatives.

Saving With Travel

Though it’s certainly not a basic necessity, traveling is important. Just a change of scenery can help you relax, destress, and regain a sense of peace. If you like to travel, there are a few things you could do to save some cash while you’re at it:

26. Rent Out Your Home

Whether you’re going away for two weeks or just a few days, you should consider renting out your place while you’re away. It can help you offset the costs of travel, and depending on where your home is, you might even earn a few extra bucks.

Alternatively, you could do a house swap with other travelers, giving them access to your home while they give you access to theirs.

27. Book Rooms Away from Popular Destinations

There’s no secret that rooms in the middle of a touristy spot are always more expensive because of their prime location. If you want to save some money, you should look for accommodation a little further away.

If you’re traveling to Europe, for instance, you could even book accommodation in smaller towns that are in the vicinity of your preferred destination and just use affordable public transportation to explore major tourist destinations.

28. Book Your Tickets With a VPN

Airfare is expensive, but it could be even more expensive where you live. Most airlines will offer different pricing to travelers from different regions, even when the starting point and the destination are the same. Before you book your tickets, get a Virtual Private Network (VPN) to change your computer’s IP address and see if you find a better deal on tickets.

Saving on Transportation

Unless you live in a larger city (and in the vicinity of your workplace) where everything of importance is a short walk away, you probably need a car to get around. The obvious saving methods for transportation include biking or carpooling, but when neither is an option, you should check out the following tips:

29. Don’t Wait to Fill Up

If you always wait until the very last moment to buy gas, you’ll need to settle for filling up your tank at whichever gas station is the closest at the moment. Instead, find the cheapest gas station in your area and fill up your tank whenever you go past it.

30. Take It Slowly

Speeding won’t only get you a fine. You’ll also use more fuel. Every vehicle is different, giving you the best fuel economy at different speeds. But as a general rule of thumb, most cars will provide you with the best fuel consumption at speeds of up to 50 mph. After 50mph, most vehicles will quickly get much worse gas mileage.

31. Shop Around for Car Insurance

Car insurance will always be a hefty expense. However, you might not have the best deal with your current provider. Ask around for more affordable insurance options and get quotes from a few different providers. If you have a good driving record and you’ve improved your credit score lately, check with your current provider. They may be able to offer you a more affordable plan.

Conclusion

Living frugally is never easy. You’ll need to think outside the box, analyze your spending habits, and change your behaviors. However, no matter how much you change your approach to finances, don’t expect to see a major change immediately. Most savings tips will only prove to be fruitful after months of following them.

Try these tips, be patient, and see what you can achieve!

The post 30+ Frugal Living Tips To Find Serious Savings in 2024  appeared first on FinMasters.

5 Best Budgeting Methods

There’s no right or wrong budgeting method. Choosing a realistic method that fits your needs will make it easier for you to follow your budget and realize the advantages of budgeting.

As you read through these five budgeting methods, envision how each method would fit in your life, and consider whether the method would fit your personality and financial situation.

1. The Zero-Based Budget 

A zero-based budget is ideal for those who have a predictable income and fairly predictable expenses. You start with your income at the beginning of the month (or whatever time period you need). You list each expense for the time period and subtract it from your income. If you have any “leftover” income that doesn’t fall into a specific category, you need to allocate the money. The idea is to allocate each dollar until you reach $0, which is where the name zero-based comes from.

With this method, one large unexpected expense can throw your math completely off course. If you go with the zero-based method, it’s a smart idea to have an emergency fund or cushion in your checking account. On the other hand, it forces you to track every expense so you know where your money is going at all times.

2. The Envelope System

Another budgeting method that’s very similar to the concept of zero-based is the envelope system. The idea is the same: you begin with your income and subtract each of your expenses until all your money is allocated. What’s different is that you put as much of your money as possible in cash, literally in an envelope.

As clunky as this method might sound, it remains popular with those who are trying to curb their spending habits in categories such as groceries, fuel, and entertainment.

If you allocate $100 per month towards fuel, you would withdraw $100 cash and put it in an envelope. Anytime you need fuel, you reach for cash from your envelope marked “fuel.” When you need to pay, you can only pay for it from your designated envelope. Once you run out of cash for the category, that’s it. You have to wait to replenish it when you receive more income. 

If you have money left in an envelope at the end of your budget period, you roll it into the next month or put it towards a goal (like paying debt or padding your savings). If you have an emergency and need the cash, instead of taking from an envelope like fuel, you use your emergency funds.

This method has been championed by several personal finance experts including Dave Ramsey. Recently, this budgeting method experienced quite a revival. In 2021 and 2022, videos showcasing the envelope system, rebranded as “cash stuffing“, had over 500 million views on TikTok.

It forces you to be disciplined with your money and stop yourself from overspending. But the method can be tough for some who find keeping up with envelopes cumbersome and inconvenient.

3. The 50/30/20 Budgeting Method

If you’re looking for a budgeting method that isn’t as detailed as the zero-based or the envelope system but still guides your money, then the 50/30/20 might be for you. The categories break down like this:

• 50% necessities 
• 30% discretionary
• 20% for savings and/or debt repayment

The key to making this budget work is your definition of needs and wants. As long as you define these early on, you shouldn’t have any issues.

You can change the percentage of the categories to better reflect your current needs. For instance, if you have a large student loan you want to aggressively pay off in 12 months, you would increase the 20% for debt repayment to meet this goal and take money from another category to cover it. 

Use our 50/30/20 budget calculator to estimate how you should divide your monthly income using this budgeting method:

4. Pay Yourself First or 80/20 Budget

This budget is designed for those who need extra discipline to save money. Any time you receive income, you pay yourself first by putting a designated amount towards your savings or retirement accounts.

You can apply this same method to debt repayment as well. You might see it referred to as the 80/20 budget:  20% would go towards your savings (or debt) goal and the remaining 80% covers all other items.

With the remaining money, you pay for your necessities and your discretionary items, but you don’t track every dollar. The reason you don’t have to watch every remaining dollar is because you’ve already paid your two most important categories first. This is a good option for those who want to aggressively build up their retirement or savings funds, or pay off debt. It’s also ideal for those who don’t like to track all their expenses on a daily basis.

5. Reverse Budgeting

This method is similar to the Pay Yourself First idea of budgeting. With reverse budgeting, you focus on one major money goal each month, usually a different goal each time. You would still follow the 80/20 rule, but the 20% you designate goes toward a different goal every month.

Examples of your goals might look like one of these:

• Add $500 to your emergency fund
• Pay off a $400 credit card balance
• Add an additional $500 to your 401(k)

Once you put the designated amount towards your goal, your remaining income covers the rest of the expenses. Like the 80/20 budget, since you’ve paid yourself first, you don’t have to track every expense going in and out. 

Like the Pay Yourself First, this is ideal for those who don’t want to bother with tracking every expense but need aggressive measures to achieve their money goals.

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Why It’s Worth the Time to Find the Right Budgeting Method

78% of Americans admit that they live paycheck to paycheck^[1], which makes them vulnerable to any financial emergency. Building and following a realistic budget is the key to breaking out of that paycheck-to-paycheck pattern. A budget will help you allocate money to specific categories and build an emergency fund. If you stick with your budget and manage it well you’ll soon be saving money for emergencies, pursuing goals like buying a new car or a home or even preparing for retirement.

A budget gives you control over your money. When you’re tracking your expenses and you know what’s coming and going, you are less likely to face those money surprises that throw us off track.

A budget is only a tool. If you choose the right tool and use it well, it will help you. If you don’t, it’s nothing more than addition and subtraction. Budgets are often based on unrealistic expectations about money, and that makes them difficult for some people to follow. The key to the right budgeting method is finding one you can use on a daily basis and basing it on realistic numbers and expectations.

How to Choose a Budgeting Method?

Budgets are personal. This means you should choose a budget method that works with your strengths and fits your income and spending habits. You know yourself and your goals better than anyone.

Once you’ve clearly defined your own money goals, both short-term and long-term, then you can narrow down the budget method you think would work best.

The most productive way to start your budget is to track your actual spending. This will show you the habits you need to adjust and allow you to base your budget on real, concrete numbers. When it comes to budgets, vagueness and guesswork are surefire ways to set up unrealistic expectations. Almost everybody who tracks their daily spending finds significant expenses they didn’t know they had. Building a budget on an unrealistic spending estimate can easily lead to frustration and even giving up on budgeting.

Get started right away! Use our online Budget Calculator to see how much money you have coming in and what you’re spending it on.

If one of these budgeting methods ends up not working for you, it’s okay to try a different one. You may have to work through a few until you find the right one. You’ll know you’ve found the right budgeting method when you learn to stick with it and start making progress towards your money goals.

The post Budgeting Methods: 5 Types of Budgets Explained appeared first on FinMasters.

Many TikTok users are vouching for the effectiveness of cash stuffing in managing finances, reducing debt, and boosting savings. In this post, we’ll delve into the benefits of this method, guide you through getting started, and help you determine if cash stuffing is the right financial strategy for you.

What Is Cash Stuffing?

Cash stuffing is similar to the envelope method, a budgeting technique championed by personal finance guru Dave Ramsey. 

Just like the envelope system, cash stuffing is the process of tucking away cash into different envelopes labeled for specific budget categories like rent, gas, groceries, utilities, savings, and more.  

You decide the amount of money that goes into each envelope based on your spending and savings goals. For example, you might allocate $150 for gas, and $50 to your emergency fund envelope. When you need money for a specific category, you can only use the money that’s in its designated envelope and nothing more, until the next budgeting cycle. 

The cash stuffing method relies entirely on cash, removing the need for credit cards and debit cards. This helps users track their spending more easily and eliminates the temptation of impulse buying.

How Cash Stuffing Works

The videos under the popular TikTok hashtag “cash stuffing” are admittedly satisfying to watch. Users, mostly women, meticulously count their cash and place it in colorful envelopes, neatly labeled with their respective budget categories.

It’s no surprise this budgeting method exploded in popularity: the videos are usually aesthetically pleasing and have an almost addictive quality to them. 

While the videos are satisfying to watch, there’s a lot more to it than putting cash into pretty envelopes. Cash stuffing requires self-discipline and commitment to work. Here’s how to do it: 

1. Determine your budget

The cash stuffing “ritual” begins on payday. When you receive your paycheck, subtract any fixed expenses. Fixed expenses are costs that don’t change from month to month, like rent or mortgage payments, car payments, insurance, and utilities. 

Once you subtract your expenses, withdraw whatever’s left in cash. This amount will be divided among different budgeting envelopes, as we’ll see below. 

Some people choose to withdraw their entire paycheck and use envelopes even for their fixed expenses. While it works for some, it can be cumbersome, especially since a lot of these bill payments are electronic or automated, eliminating the need to put them in envelopes. 

2. Figure out your spending categories

Each envelope represents a different budget category. The categories you choose will depend on your needs, lifestyle, and savings goals. Here are some of the most popular categories among cash stuffing aficionados on TikTok, to help you get started: 

Necessities – these envelopes should be prioritized when you’re distributing your budget, as they’re important expenses you have to pay: 

• Groceries
• Gas
• Car maintenance and repairs 
• Taxes 
• Child care 
• Debt repayment 
• Home maintenance 

Savings goals –  you can choose to keep it simple with an envelope labeled “Savings” or have multiple savings envelopes. Here are some ideas: 

• Wedding fund 
• Vacation
• Emergency fund  
• Christmas gifts 

Discretionary expenses – these are nonessential expenses, but that doesn’t mean they shouldn’t be considered once you allocate money towards essential categories. 

• Eating out
• Entertainment 
• Beauty & haircare
• Gifts 
• Shopping 

While everyone will have essential cash stuffing categories like gas and groceries, other envelopes will look different from one person to the next. Think about the categories most important to you when you start creating your envelopes. 

3. Fill your envelopes

Divide your cash into stacks based on denominations — one-dollar bills, fives, tens, twenties, and so on. This will make it easier to distribute the amounts into their respective envelope.

Now comes the part you’ve seen on every cash stuffing TikTok video: you get to put the cash into separate cash stuffing envelopes, each marked with a different budget category.

The amount of cash you “stuff” into each one depends on your budget and spending goals for each category. For example, to estimate how much cash to deposit in your envelope labeled “gas”, look at the average amount of money you’ve spent on gas in the last few months. Some envelopes will get less cash than others if your goal is to curb your spending in that category. 

When in doubt, follow the 50/30/20 rule. This budgeting guideline allocates 50% of your cash to needs like groceries or child care, 30% to wants like eating out, and 20% to financial goals like savings or debt repayment. 

People who use the cash stuffing method keep track of their budget using a notebook. Writing down your expenses and savings helps you organize your spending and track your progress.

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4. Spend only what’s in each envelope

Remember how I mentioned you needed discipline and commitment for this to work? Here’s why: you’re only allowed to use the cash in each envelope for that specific category and nothing else. For example, when you pay for groceries, you can only pay for them from your designated “groceries” envelope. 

If you run out of cash in one envelope, you can’t “borrow” from a different one. You’ll have to cut back on spending and make some sacrifices until the next budgeting cycle. 

5. Replenish your envelopes

People typically replenish their envelopes and revisit their budget every payday, whether that’s bi-weekly or monthly.

If you have money left over in an envelope at the end of a budgeting period, rejoice! You can either reward yourself with a treat or put the leftover money towards a goal like savings or repaying your debts.

The Benefits of Cash Stuffing

The cash stuffing method helps you take control of your finances, especially if you struggle with compulsive spending and impulse buying.

Cash Stuffing: What Is It And Can It Help You?

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Paying for everything in cash makes you more aware of the money you’re spending. Cash is tangible, and parting ways with makes you think twice about what you’re spending it on. A credit card, on the other hand, is far too easy to swipe. Research done by Duncan Simester and Drazen Prelec of MIT found that shoppers’ willingness to spend goes up by 100% when using credit cards instead of cash. 

Cash stuffing also helps you stick to a budget and prioritize allocating money towards necessities like rent, bills, and groceries. Since each envelope has a designated purpose, it helps you to spend mindfully on things that align with your goals. When you’re intentional about each dollar you spend, you’re less likely to waste money on unnecessary things. 

The monthly or bi-weekly ritual of replenishing your envelopes gives you a chance to revisit your budget and savings goals and go over your finances. This helps you develop healthy financial habits and relieves financial stress because you don’t have to waste energy doing mental accounting every month. You know exactly what bills you’ve paid and where your money is going. 

Is Cash Stuffing Right For Me?

Cash stuffing is especially helpful for people who struggle to control their spending and credit card usage. Avoiding credit card use and only spending the cash you have available in your envelopes prevents accumulating credit card debt. 

But this method may not be the right fit for everyone. Relying on cash to pay for everything in an increasingly cashless society is not exactly practical. If you’re at the grocery store and realize you forgot your envelope, you need to go back home and get it, according to cash stuffing rules. 

Another cash stuffing challenge is the safety aspect. Some people are not comfortable carrying around envelopes full of cash every time they leave the house. If anything happens to it, you’re out of luck. Keeping your money in a bank account is a much safer option, as it’s insured by your bank. 

Speaking of bank accounts, having a cash “savings” envelope is the equivalent of hiding your cash under a mattress. Not giving your money a chance to earn interest and grow causes it to lose value over time, especially when inflation has soared to 8.5%.    

Cash Stuffing Alternatives

If you prefer to budget online, you can take the cash stuffing concept and put a digital twist on it. Budgeting apps and personal finance software like Mint or You Need A Budget can help you create custom budgets and link directly to your bank accounts. 

Mint, for example, tracks your spending and allows you to choose budgeting categories, mimicking cash envelopes without the need to keep and carry cash. 

Get Started With Cash Stuffing 

The newly rediscovered envelope system, now rebranded as cash stuffing, has helped countless TikTok users take control of their finances and keep up with the rising cost of living. 

Are you thinking of giving cash stuffing a try? Get yourself a few envelopes and a marker and you’re good to go. If you want to get more creative and have some fun with it, look for cash stuffing templates or fancy cash stuffing binders on websites like Pinterest or Etsy.

And remember, if it’s not the right fit for you, there are many other budgeting options out there you can try until you find the one that’s just right. 

The post What Is Cash Stuffing, the Viral TikTok Budgeting Method? appeared first on FinMasters.

Teens still have to learn how to make a budget before they leave the nest. You’re likely to encounter various challenges when talking to teens about money, but there are positive ways to teach them the concept of budgeting and implement strategies that will work for the rest of their lives.

Why Is Teaching Budgeting for Teens So Difficult?

Why is it so hard for teens to make responsible decisions? Biology, for one thing.

The prefrontal cortex is the part of the brain responsible for decision-making and association. However, it’s also the part that takes the longest to mature. Scientists have found the prefrontal cortex fully develops after a human reaches their mid-twenties. Even the most skilled teachers run into this complication, let alone parents.

On top of that, teens are surrounded and influenced by a lot of outside factors. Consumer culture, more pervasive now than ever, has made personal branding a huge focus for many of them. Add traditional peer pressure into that mix, and the messages the teen brain receives are almost deafening.

The natural impulsiveness of teens and peer pressure often complicates the process of learning budgeting for teens.

Right off the bat, parents face a solid wall of resistance that isn’t really their children’s fault. But when they’re on the cusp of adulthood, teens need to learn about saving money and establishing good spending habits.

They have a lot of noise to contend with, and physical development makes decisions even harder for them to make. How can parents get through?

Why Is Teaching Teens Budgeting Tips So Important?

With some rare exceptions, teenagers don’t face the complex decisions about money that adults have to manage. Many receive allowances they spend on pursuing fun stuff. That’s normal and intrinsically valuable for their development.

Adults have to transition those attitudes about money when they become independent. Mortgages, credit cards, car payments, investments, retirement savings, and emergency funds are some of the budgeting elements adults face every day. Teenagers don’t have to deal with these things, but they need to be prepared for them.

Attaining financial literacy is no easier than acquiring other kinds of knowledge. Still, it’s the backbone to managing wealth and security when you reach adulthood. When introducing the concept of a budget for teens, you need to be practical and considerate of their situation and proceed with care.

Introducing Budgeting Concepts to Teenagers

Researchers suggest that it’s never too early to talk about money with children. Even 5-year-olds can understand the concept of saving money. When they hit their preteen years, they encounter more spending options and slightly more challenging decisions.

The tween years are often the ideal time to start introducing the concept of budgeting for teens. When preadolescents have money to spend, parents can integrate some of the more intricate financial concepts with their children’s reality.

Here are some practical methods and approaches to start with when they become aware teenagers.

Teach Them to Understand Income

Regardless of age, the first step in every financial decision is knowing how much money you make and where it comes from. With teenagers, income often comes in the form of a weekly or monthly allowance. Some earn money by working part-time or selling goods online. Some also receive cash gifts for birthdays and holidays.

These forms of income parallel how adults earn money — through full-time jobs, investments, reselling, and so forth. Teenagers must understand this: How they make money now isn’t that different from how they will in the future. It’ll just be on a much larger scale.

But for now, focusing on this first step is very important in the journey of budgeting for teens. Have them compute all the money they make from allowances, chores, work, and other sources. Add the money they get from all these sources in a single month. That figure is their first monthly income statement.

Learn more: Check out our comprehensive lists of suitable jobs for 14 and 15-year-olds, along with online jobs tailored for 16-year-olds.

Help Them Understand Regular Expenses

Next comes the other side of the coin (pun intended): Where does your teen’s money go? This is the part where parents can introduce a few expenses that might cross over with their children.

Adults understand regular expenses such as rent, mortgage, car payments, insurance, utility bills, etc. On top of entertainment, teenagers may be responsible for adult-like expenses such as gas, clothing, transportation, and even their share of the family’s mobile phone bill. As with income, have your teen make a monthly expense report including all their must-haves and must-dos.

At this point, your teenager can subtract their monthly expenses from their monthly income. Do they have enough money to cover their needs, or do they need a little more? This move explains the concept of net worth, even if they just have $2 left.

Make Sure They Understand Savings

Now comes the point to talk about saving money and setting savings goals. First off, let your teen know that many adults have massive problems wrapping their heads around the concept of savings. That will hopefully humanize you and make your teenager feel like they’re not being “talked down to.”

Make sure they understand the point of savings: to have enough money to afford a major investment. Compare your savings for a house, retirement, car, or vacation to your teen’s savings for college, entertainment, transportation, or travel. Explain how their savings goals parallel yours.

Learn more: Kickstart your savings journey with our quick-start guide on how to start saving money effectively.

Create a Budget

With all those concepts firmly understood, you’re ready to tackle what should be at the heart of every family’s financial strategy: the monthly budget. The first step is accounting for expenses in two categories: saving and spending. From there, encourage them to set up subcategories that dictate where the money will go.

Larger savings goals may be for a car, college, a laptop, a cell phone, or deposits into their savings account. Regular spending includes lunch money, gas, streaming subscriptions, clothes, entertainment — anything teens need on a very basic level.

Allocate Money for Expenses

At this point, it’s time to decide how much money your teen will set aside for these expenses. There are several viable strategies for doing so.

One is the popular 50/30/20 rule — 50% of their income goes toward what they need, 30% for what they want, and 20% for savings. Another is zero-based budgeting, in which they assign every dollar they make to a regular expense or savings account until their income reaches zero.

You can also talk about percentage-based budgeting, paying off small debts first, or automatically putting a portion of monthly income toward savings (“pay yourself first”). A budgeting app can be very useful at this stage.

Looking for ways to teach financial skills to your teen? Check out our practical advice on #budgeting-for-teens. #TeenFinance #MoneyMatters

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Introduce Tracking and Monitoring

Finally, give your teenager the tools they need to stay on top of their budget. Apps like Mint or PocketGuard are especially handy for this. However, your teenager should also use more hands-on programs like spreadsheet software, accounting software, or even green ledger paper to physically track their income, savings, and spending.

Again, underscore that many adults have problems keeping track of their money. It’s a real-world issue that can be hard to fix without knowledge. That’s what you’re trying to provide to your teenager right now: the ability to reach a higher level of discipline and communication when it comes to money.

Learn more: Discover the top budgeting tools of 2023, including both free and paid options, to elevate your financial planning.

Why Is Budgeting Important?

Children and teenagers don’t typically think too deeply about the specifics they’ll have to tackle as adults, aside from daydreaming about their future careers.

However, teenagers are in a strong position to understand budgeting concepts. They’re important to learn because they establish habits that can sustain them as adults. With a firm foundation in basic financial planning, they’re more likely to endure the unpredictable when they’re adults.

They may see positive results from budgeting sooner than they think. A 22-year-old Princeton student graduated debt-free, attributing her achievement to her father’s insistence on financial education. There are numerous stories about young entrepreneurs and investors who found notable success after learning about earning and savings as teenagers or even younger.

These success stories are unique, but we know they’re possible to achieve. One thing is for certain: all great financial success comes from a deep understanding of how budgeting works. The lion’s share of failure stories are of those who didn’t have it.

Learning How to Withstand Peer and Cultural Pressure

Most modern parents remember how peer pressure affected them as teenagers. Multiply that pressure by two, throw in media influence toward consumers, and augment it all with the pervasive influence of the internet. That’s the kind of pressure modern teenagers face.

These kinds of influences can have a big effect on a teenager’s budget. They want to have the things their friends have. They’re driven by consumerist culture and social media influencers to spend money on things they want.

This is another area in which budgeting for teens can help. It counteracts the emotional pressure they feel with the reality of money planning. There’s virtue in having a defined savings goal, whether it’s college tuition or a used car. Accounting for every cent they have and properly allocating their money are homegrown defenses for withstanding outside pressure.

Open communication is key to helping your teenager survive cultural pressure. Being honest about your own experiences as a teen will help them understand their own position. Reinforcing their savings goals and discussing concepts like delayed gratification are also valuable.

Encourage Responsible Money Management

Financial literacy and accountability don’t arrive overnight — if ever. Fiscal responsibility must be taught and culturally nurtured.

You can teach your teen how their income-making methods will transfer over into adulthood. Compare their chores to your job. Working may be a grind, but sticking to it breeds a task-based approach. Older teenagers can get part-time jobs of their own for direct experience.

Allowances offer a chance for education on other money matters, like financial independence, budgeting practice, and the consequences of making certain choices. This approach is especially effective for budgeting for teens, as it provides an ideal instrument for demonstrating how to set financial goals and how to use their money toward achieving them.

However your teen gets their money, it’s never too early to instill a sense of financial priorities and goals. Having those concepts firmly in mind is the key to staying financially — and emotionally — successful as adults.

Track Your Teen’s Financial Progress

Your teenager should monitor and track their progress when learning how to budget, and so should you. But it’s important to do so without being overbearing or intrusive. They’re not babies anymore, but teenagers still feel vulnerable and sensitive.

That’s why open, unthreatening communication is such a vital part of teaching budgeting for teens. Talk honestly and freely about setting savings goals, creating budgets, monitoring cash flow, and controlling spending. As always, sharing your own experience in these areas can be valuable.

Beyond that, work with your teenager and agree on expectations. If you plan on monitoring their bank account, explain that from the outset. Insist that it’s for education purposes only, not to impose your standards on them.

Most of all, give your teenager the respect they need (and deserve). Sometimes teens need privacy, and that can instill a sense of financial independence. That’s what all this teaching is about in the first place.

Budgeting for Teens: A Valuable Learning Experience

The real world can be scary, but learning how to manage money doesn’t have to be. That’s why budgeting for teens is a crucial thing to teach. The driving principle is being open, honest, and supportive.

Make learning how to budget hands-on experience. Collaborate on a budget, help your teen sweat the details, resist undue outside influence, and spur positive financial habits. If you’re successful, they will learn something valuable. You will, too!

The post Budgeting for Teens: Practical Advice for Parents appeared first on FinMasters.

You’re not alone, and the good news is there are resources to assist you in taking the first steps. In this article, we’ll delve into five top budgeting tools and provide additional tips on kickstarting your budgeting journey.

Best Budgeting Tools

Whether you have simple finances or a more complicated situation like managing multiple household budgets or planning for fluctuating income, many budgeting apps and tools can help. Here are the 5 we think are best:

1. Quicken – Best overall budgeting software
2. YNAB – Best for young adults and budgeting beginners
3. Honeydue – Best budgeting solution for couples
4. Rocket Money – Best budgeting app for improving your finances

All of these apps/software have robust features for helping you budget as well as manage the other aspects of your personal finances. Now, let’s explore each of these options in more detail.

Learn more: If you’re new to financial planning, our article offers a straightforward guide on how to budget effectively.

BEST OVERALL

Quicken

Quicken is probably the most comprehensive piece of personal finance software on the market. It might be more than you need if you’re just looking to build a simple household budget, but if your finances are more complex and you want all the options, you’ll find them here. Read more

• Cost: Five plans, from $28.68 to $119.88 per year
• Features: Comprehensive management of personal finances

Learn More

BEST FOR YOUNG ADULTS AND BEGINNERS

YNAB

YNAB stands for You Need A Budget. If you do (and you do), YNAB can help, especially if this is your first voyage into budgeting. It’s a flexible program that allows you to adjust and refine your budget as you go along. Read more

• Cost: $14.99/month or $99/year
• Features: Flexible budgeting designed for beginners.

Learn More

BEST FOR COUPLES

Honeydue

Finances can be a huge stumbling point for couples. Honeydue is a budgeting app designed to help couples work together to manage their money. Read more

• Cost: $14.99/month or $99/year
• Features: Flexible budgeting designed for beginners.

Learn More

BEST FOR IMPROVING FINANCES

Rocket Money

Rocket Money combines a full suite of budgeting functions with bill negotiation and the option of finding and canceling unused subscriptions to help you save money. Read more

• Cost: $0-$15/month
• Features: Bundles budgeting tools with bill reduction services.

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1. Quicken

Best Overall Budgeting Solution

If you are looking for a full-service personal finance solution, one of Quicken’s subscription-based packages might be a good fit.

As with many other budgeting apps, you can create budgets, set up bill-due reminders, and view your net worth. Quicken also offers additional tools to help you manage your investments, track your business expenses, and budget for the whole year.

With a wide range of features appealing to multiple audiences (i.e., investors, small business owners, average budgeters, etc.), Quicken lands the top spot on our list as the best overall budgeting tool.

App/Software Features

Quicken offers a wide range of features and functionality. We’ll cover a few key features here, but be sure to check out Quicken’s product comparison tool for a full breakdown.

Budgeting with Simplifi

The budgeting process with Simplifi works a little differently. Instead of creating custom budgets, Simplifi creates a personalized budget for you. Simplfi can also help you differentiate between regular bills and subscriptions.

Pricing

Quicken offers 5 subscription-based plans for budgeting. Each comes with a different cost and a different set of features. We are omitting the 5th option, Starter, as it has limited features and a high cost.

*Quicken advertises monthly prices even though subscriptions are billed annually. 

It’s worth noting that the Home & Business package is not designed to track complicated business finances. 

Canceling Quicken

In lieu of a free trial, Quicken offers a 30-day money-back guarantee. If you cancel within that 30 days, you will receive the entire year’s subscription price refunded. 

After 30 days, no refund will be issued for cancellation. You can cancel automatic renewal at any time to avoid future charges.

Learn more: If you’re looking to optimize your financial management, our article offers insights on the best personal finance software available.

2. YNAB 

Best For Young Adults & Beginners

YNAB, which appropriately stands for You Need A Budget, is a zero-dollar budgeting system that lets you fully account for every dollar you earn.

YNAB’s goal is to help you plan for all expenses, even those pesky non-monthly expenditures like insurance, Christmas, etc. Using their 4 rule budgeting system accurately, YNAB claims the average user is able to save up to $600 in just the first 2 months.

This, coupled with a free trial and support of automatic and manually updating accounts, earns YNAB the vote for the best tool for young adults and those new to budgeting.

App Features

When it comes to budgeting and personal finances, YNAB offers a variety of features. Key features include:

• Manage account automatically (linked), manually, or through import (i.e., statements)
• Track every dollar of spending
• Reconcile your budget
• Set and track savings goals
• Create multiple budgets
• YNAB Together – a system for managing and sharing family budgets under one subscription

To learn more about the most recently added features, check out YNAB’s New Features page.

Pricing

YNAB offers a free trial period, but once that is up, you’ll need to pay a subscription fee to continue using its budgeting resources.

*you’ll need to prove you are a college student using a student ID, transcript, or tuition bill

As you can see, if you pay annually, you’ll get a significant discount. $179.88 ($14.99 X 12 months) versus $99.

3. Honeydue

Best For Couples

Designed with couples in mind, Honeydue is an app that helps couples manage their money together.

Honeydue has the same features for linking accounts and creating budgets as most budgeting apps offer but with added features for couples, like joint accounts, shared budgets, and in-app chat.

These couple-forward features and free access are what help make Honeydue our pick for the best couples’ budgeting app.

App Features

Honeydue offers general budgeting features and features designed for couples. Here are a few of the key app features:

The JointCash account is a free, FDIC-insured joint bank account with a Visa debit card offered exclusively through Honeydue.

Pricing

Honeydue does not charge anything for the use of its budgeting app. And, unlike some other free platforms, Honeydue does not make money from partner referrals.

Looking to manage your finances better? Explore our top picks for #budgeting-tools.

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Instead, every few months or so, Honeydue asks each of its users to tip the app. Tips range from $1 to $10 and are charged on a recurring basis. So, if you set up a $2 tip for this month, you’ll continue to tip $2/month until you cancel. Tips are 100% optional.

4. Rocket Money

Best For Improving Your Finances

From the creators behind Rocket Mortgage comes the new budgeting app, Rocket Money.

The Rocket Money app lets you track all your accounts in one location, view your spending, and track your net worth. But Rocket Money goes one step further by helping you improve your finances through subscription cancellation, bill negotiation, and credit score tracking.

These money-saving tools/resources set them apart from the competition and earned them our pick for the best choice to improve your finances.

App Features

While most of Rocket Money’s selling features require a Premium subscription, there are a few basic budgeting features:

• Linking all your accounts
• A personalized budget
• Heads up on potential overdraft situations
• Net worth tracking
• Custom asset tracking (i.e., an action figure collection or designer handbags)

Rocket Money Premium offers several features designed to help you save money. These include:

• Subscription management – view all your subscriptions in one place and have Rocket Money cancel the ones you don’t need.
• Bill negotiation – Rocket Money’s staff will search for better deals and negotiate savings on common bills like insurance, cable, internet, etc.
• Autopilot savings – a savings account offered by Rocket Money with automatic withdrawals and personalized recommendations on when and how much to save.
• Credit score tracking – track changes to your Experian credit report and VantageScore.

The one significant downside to budgeting with Rocket Money is that they do not currently support adding and updating accounts manually.

Pricing

The Rocket Money app, along with its basic budgeting features, is 100% free. However, if you want to use any of the advanced money-saving features, you’ll need a paid subscription.

Rocket Money’s pricing is honor based, meaning you pay what you think the service is worth. Below is a breakdown of the options and associated pricing ranges. Rocket Mortgage users get Rocket Money Premium for free.

* You can pay in one lump sum or set up a payment plan.

The bill negotiation service is a custom pre-set charge based on the negotiated savings. So if Rocket Money saves you $240 a year on your internet bill and you offered 40% for the successful negotiation, you’ll owe $96.

Best Budgeting Tools – Honorable Mentions

The options we listed above are not the only budgeting tools available on the market. There are thousands of budgeting apps, websites, software, systems, etc.

While the ones that we have covered are, in our opinion, the best options, we do want to take a minute to highlight some additional apps/tools.

• Zeta – a good alternative to HoneyDue for couples’ finance
• Goodbudget  – an app version of the envelope system
• Empower – useful for managing your investments with budgeting tools on the side
• BusyKid – a great app for teaching young kids how to create a budget
• Fudget – bare-bones app for budgeting without syncing financial accounts

While the above options did not make our best-of list, we believe they deserve to be mentioned because of their unique features.

Comparing the Best Budgeting Tools

Below is a quick review of our best budgeting apps/software and how they compare to one another with their basic budgeting features.

The DIY Budgeting Alternative

You don’t have to use a dedicated budgeting app to help establish a budget. There are other tools and resources available to you that can help you track your finances and wealth.

The downside to a DIY system is it may take a bit longer to set up and manage when compared to an all-in-one app. But the upside is that you have infinite control over creating and managing your budget as well as ensuring your financial privacy.

Best DIY Budgeting Tools & Resources

DIY budgeting can work in any way you desire. You can craft a complex budgeting system or pursue a streamlined approach. Regardless of how you choose to budget, several budgeting tools may already be available. This can include tools from

• Banking accounts
• Retirement accounts
• Credit monitoring websites
• Credit cards
• Loans
• Spreadsheet templates (i.e., Google Sheets or Excel)
• Investment apps
• Finance websites
• Tax software

You can use as many tools and resources as you want in whatever way you choose.

It doesn’t matter how you budget. It only matters that you are budgeting.

The post Best Budgeting Tools of 2023 (Free & Paid) appeared first on FinMasters.

Our post explains various budgeting methods to help you find the one that best suits your financial goals.

Common Budget Categories And What to Include

To help you get started, we compiled a list of budget categories typically found in an average household budget. We also added suggestions on what you can include in each category.

Creating a budget just got easier! Use our online Budget Calculator to quickly get an overview of your finances.

Budget Categories Printable Checklist

• A checklist to help you build your budget.
• 100+ budget categories, so you don’t miss any expenses.
• Free printable for easy tracking.

Download Checklist

Quick Tips

Before set up your budget categories, take a few moments and think about your habits and goals. These ideas are a place to start.

• Creating a budget that fits your expenses and spending habits is the key to success. Depending on your circumstances, you may need to add more budget categories or adjust others. Using categories that fit your spending habits will help you stick to your budget. You can always add new ones if you come across unexpected expenses.
• Write down your expenses for the previous month before you start building your budget. This way, you’ll quickly be able to see if you need all these categories in your budget and if you are missing any.
• For easier tracking, you can combine multiple categories into one umbrella category.
• One of the most common pitfalls of making a budget is leaving out a budget category that will require money at some point.
• You don’t have to stick to the same budget each month. If you know that you’ll have new expenses in a month to come, adjust your budget accordingly.
• If your budget doesn’t succeed in the first month, don’t be discouraged. Look at what went wrong and adjust your budget accordingly. Most people take some time to refine their budgets!

110 #Budgeting Categories to Help You Start Your #Budget

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Free Monthly Budget Spreadsheet Template

• This simple monthly budget template makes budgeting fun and exciting.
• Easy-to-follow instructions so you can get started budgeting in no time.
• Access your budget online from anywhere. See all features

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The post 100+ Budget Categories to Help You Start Your Budget appeared first on FinMasters.

Despite the inroads made by online shopping and delivery services, most consumers still go to physical supermarkets and department stores. However, they could be making themselves more susceptible to suggestion and influence at the point of purchase.

Physical retailers have ways of getting shoppers to buy more than they need at the cost of personal finance best practices. And their tactics are more subtle than pop-ups, commercials, and ads.

Here’s how stores trick you into spending more than you planned and some helpful ways to save.

1. The 99-Cent Solution

A famous way for stores to trick you into spending more is the 99-cent solution. This trick has been around since retail markets were invented. You’ll see sale items and pantry staples priced for a certain dollar amount plus 99 cents — soup for $2.99, frozen pizzas for $8.99, socks for $11.99, etc.

Retailers know that since shoppers primarily pay attention to the first number in the price (the “2” in “$2.99”), they may not pick up on the fact that the item is actually $3.

The solution is simple: get in the habit of mentally rounding up prices.

This even goes for products priced in the mid-dollar range. The more you think you’re spending, the more cautious you’ll be.

2. Suggestive Product Placement

Supermarkets tend to place their most profitable goods near the entrance. Fresh-baked bread, flowers, attractive produce, and grab-and-go snacks are often positioned to be the first things shoppers see when they come in and the last things they see before they check out.

These products appeal to many shoppers. Some can’t resist the allure of brightly colored cookies and pastries, while others may enjoy the instant gratification a bag of chips and a soda can offer.

Managers employ various strategies to trick you into spending more, such as positioning their most profitable items at eye level in the aisles. Wherever you go, they’ll try to get you to buy something without much thought or effort.

To guard against this, make a shopping list beforehand and stick to it as much as possible. Impulse buys may still happen, but having a plan in place will help you avoid most unnecessary purchases.

Learn more: Getting a grip on your finances starts with understanding how to budget; this beginner’s guide can pave the way.

3. Big Sale Signs

Thrifty shoppers are always looking for a bargain, and retailers know this. They understand that even the illusion of a good deal will appeal to these customers. As such, they tend to play up price discounts, clearance sales, and other promotions.

This doesn’t mean the discounts aren’t real, just that stores go out of their way to promote them with large signs and bold-type prices, drawing your attention to heavily advertised items you may not need.

Remember that sales are usually seasonal. Back-to-school items are priced lower around August, chocolates and flowers are marked down close to Valentine’s Day, and Christmas specials can begin as early as October. Be aware of those pushes before they happen. Question the value of the products you look at.

4. “Free” Samples

Free samples are one of the biggest draws of massive membership stores like Costco. Whenever you see a platter of freshly prepared food items or a tray of ice-cold beverage samples, you’re guaranteed to see a swarm of hungry shoppers.

The objective, of course, is to get you to buy the item on the spot. As direct and guileless an approach as it may seem, it’s just another example of how stores trick you into spending more.

Some shoppers might feel a slight sense of obligation to the workers who give them samples. After all, if they’re taking the time to feed you and talk to you, the least you can do is buy what they’re selling.

Don’t take the bait. And if you do, remember that you’re not obligated to do anything more than thank them.

5. Colossal Carts

Shopping carts were introduced in the 1930s. After World War II, retailers started making them bigger. By the mid-1970s, they had become so big that consumer advocates began noticing.

These days, with the rise of discount membership outlets, shopping carts are three times bigger than they were in 1975.

The logic behind this strategy is plain if you take the time to think about it — the more space you have to fill, the more you’ll find to fill it.

Many supermarkets now offer miniature shopping carts. If you’re just making a run for a few items, it’s a good idea to grab one of these smaller carts.

Another option is to bring your own reusable grocery bag. That way, the size and weight of the items you put in it might limit you from buying what you don’t need.

6. Miles of Aisles

Shoppers who don’t arrive at the store with a clear idea of what they need tend to find themselves wandering aimlessly down each aisle. As you might imagine, this can easily become a waste of time and money, especially if you’re at a superstore with dozens of aisles.

Overcoming the urge to meander is mainly a matter of self-discipline and planning. You’re less likely to drift if you have a concrete objective for your trip.

Resist the urge to venture down every aisle. This is how stores trick you into spending more than you planned. Stick to your shopping list and try not to deviate from it. A little curiosity is okay, but giving in to every impulse is a good way to spend much more than you intended to.

7. You Need It Now

The modern retail experience is defined by time: buy now, act fast, don’t delay. Retailers understand this all too well, which is why they promote limited-time offers.

Sales that only run for a limited time promote urgency: if you don’t pull the trigger immediately, you won’t get the bargain price. FOMO is a very real thing, and many retailers take advantage of this uniquely human trait.

In reality, limited-time discounts is how stores trick you into spending more than you intended. They’re typically seasonal and rarely reflective of shoppers’ actual needs. All they do is prey on your anxiety over missing out on a good deal to convince you to buy things you have no use for.

If you don’t actually need something that’s on sale for a limited time only, don’t give it a second thought.

8. Anchors Away

One retail tactic that showcases how stores trick you into spending is price anchoring, which is when stores advertise high market values on questionable items to make sales that don’t actually save the customer money.

Retail therapy is great, but not when stores outplay us! Unmask their strategies and learn to #shop-smarter. Check our recent insights.

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Shoppers are often so busy thinking about other things that they don’t take the time to analyze market values. Consequently, they accept whatever price the store gives them. In truth, “suggested” retail prices can be exaggerated beyond reason.

The solution is knowing the average going prices of various items before you ever set foot in the store. However, this requires a little research. Online shopping communities, social media groups, and message boards can be a good place to start.

9. The Sound of Music

You might not even notice it, but background music is one method in the arsenal of how stores trick you into spending more.

As recently as 40 years ago, calming music was thought to promote relaxation in shoppers. This supposedly made them likely to spend more time at the supermarket, naturally leading to more purchases.

Muzak went out of fashion decades ago, but music still plays a big part in sales strategy. Background music is still designed to make shoppers want to linger around, and it’s targeted for maximum effect.

10. The Old Switcheroo

Have you ever noticed how often your local grocery store’s layout changes? Sometimes, there’s an obvious reason for the shuffle, like if the store has recently undergone a complete remodeling. Other times, though, it’s simply a sneaky for a store to trick you into spending more.

Most shoppers take comfort in knowing where everything at their neighborhood stores can be found, especially if they’ve been going there for years. When that’s suddenly no longer the case, it creates tension.

A new store layout can make habitual shoppers nervous that they won’t be able to find their go-to pasta sauce, laundry detergent, or medications. As a result, they might go down other aisles to check for other essentials. They’re likely to do so until they familiarize themselves with the new layout.

As you well know, more time in the store equals more opportunities for sales.

The store probably hasn’t gotten rid of the product you want, only moved it. This is another way stores trick you into spending more. They know that the extra time you need to find the item will create more opportunities for impulse buys. Keep that in mind as you search frantically for your favorite potato chips.

Tricks Used by Online Storefronts

But what about online retailers? After all, many modern shoppers prefer to make purchases on the Internet rather than visiting a traditional store. Unfortunately, online retailers can be just as crafty as brick-and-mortar stores, and they have some sly ways of tricking you into spending more.

Some common tactics include:

• Putting extra items in your basket as part of a “combo” deal.
• Charging unexpected fees at checkout for shipping and handling.
• “Confirm-shaming” customers with loaded opt-out statements (“No, I don’t want to improve my health”).
• Hiding advertisements inside what looks like genuine content.
• Claiming that there is “only one piece left” of an item you searched for.

Of course, the most widespread online shopping manipulation technique is bombarding you with ads based on your searches or even on things you said while your phone was on!

Unfortunately, these online tricks can have drastic effects on your wallet.

Forewarned Is Forearmed

There’s nothing inherently unscrupulous about any of the strategies mentioned here (aside, perhaps, from price anchoring). These subtle psychological lures have been around for as long as shops have.

As long as brick-and-mortar stores exist, managers will return to these strategies to generate more revenue and keep you spending more than you should. Knowing how stores trick you into spending and what those methods look like is the key to avoiding being made a sucker.

The post How Stores Trick You Into Spending More (And How Not to Fall for It) appeared first on FinMasters.

If I pay for it in cash, it’s free.

“Girl math” started as a viral trend on TikTok and gained popularity as women (and men) share how they rationalize their spending habits. Many of the videos are just for laughs, but the ideas they present can have a significant impact on your finances, both good and bad.

So, let’s take a look at what girl math is and when you should and shouldn’t use it.

What Is Girl Math?

The term “girl math” is often applied to any technique used to rationalize or defend purchases. This can include big, expensive purchases and smaller ones. The term doesn’t have a fixed definition and is evolving as it is used.

While “girl math” is frequently used to defend unnecessary purchases, there are elements of legitimate budgeting and spending strategies within the method.

Applying Girl Math

Let’s look at an example to understand how girl math looks in the real world.

Expenses for a day
Top up your gas tank	$40
Get coffee	$8
Lunch with coworkers	$15
Snack from a vending machine	$2.75
New outfit	$120
Concert	$80
Total	$265.75

Now, let’s apply the ideas behind girl math to this day’s expenses.

Expenses for a day
Top up your gas tank	purchased with a gift card	free
Get coffee	purchased with the Starbucks rewards app	free
Lunch with coworkers	paid with your Venmo balance	free
Snack from a vending machine	under $5	free
New outfit
– Top	Returned for a different size	free
– Bottoms	50% off, original price $60	Made $30
– Shoes	Estimated use of once a week	$1.15 per use
Concert	Paid for 4 months ago	free
Total		+$28.85

The result is not just less money spent but an actual “gain” of $28. Yes, this scenario is a bit extreme, but it accurately illustrates the perception of how spending is perceived when using girl math.

What Are the Dangers of Girl Math?

The biggest danger of girl math is the disconnect with how much money you are actually spending.

The girl math way of thinking can make it challenging to come up with any kind of realistic budget and stick to it. How do you track your expenses if you view everything as free?

Another big sticking point is the inherent danger of cost-per-use breakdown. This is especially true with expensive purchases.

When Should You Use Girl Math?

While girl math may not be the best choice for everyday spending, there are some situations where it has advantages.

Discretionary spending would be the major one. Using girl math for purchases is fine if you have already budgeted X amount of money for discretionary spending.

This girl math purchase makes sense if you have at least $60 budgeted for clothing expenses.

Using gift cards or return items to make purchases can also be a valid way of stretching your budget. These purchases really are free, especially if the original item or gift card was given to you.

Another valid idea of girl math is the cost-per-use idea, but only when comparing purchases.

Looking at a purchase this way shows there is more value (at least financially) in purchasing the mani-pedi or the new pair of shoes than there is in dinner with friends.

Cost-per-use can also be a good way to compare different price points. For instance, you can buy $20 jeans that wear out in a few months and need to be replaced, or you can splurge on $50 well-made jeans that last you several years.

Diving into the #girlmath phenomenon: Is it a sound #budgeting method or a risky TikTok trend?

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“Girl math” is often lighthearted and can just be a way of joking about spending. If you’re keeping to a budget and not piling up debt, a bit of girl math won’t hurt and could help. If those “girl math” hashtags are covering up serious overspending and a growing pile of debt, the joke isn’t funny anymore. It’s time to make changes or even look for help.

Alternatives to Girl Math

If the girl math way of looking at your finances is not working for you, there are plenty of other budgeting methods you can try.

Envelope System

The envelope system consists of creating specific budget categories and setting aside cash in envelopes for each category. This method recently saw a surge in popularity and was rebranded as cash stuffing.

The envelope system has a few similarities to girl math. Preloaded rewards accounts are essentially a sort of digital discretionary spending envelope. This can make this budget method an easy-to-adopt alternative to girl math.

50/30/20

For those looking for a simpler budgeting method that provides overall guidance, the 50/30/20 method might be a good option.

This method breaks down your budget into

• 50% necessities
• 30% discretionary
• 20% savings/debt repayment

Using this method, you can still apply the girl math principles to your 30% discretionary spending while ensuring that your necessities like rent and utilities are paid.

Zero-Based Budget

This budget method is the opposite of the idea that purchases are free. This budgeting method helps you allocate each dollar you earn. Essentially, the goal is to end up with $0 unaccounted-for money each month.

If you’ve previously gotten carried away with spending or lost track of where your money is going each month, this method can help you get back on track.

DIY Budget

When looking for new budgeting ideas, you don’t necessarily have to pick a method right away. Instead, start tracking your spending now, determine your spending categories, and decide where you want to be.

Then, you can choose the budgeting method that works for you. To get a better idea of how to get started, check out our article on budgeting basics.

Learn more: Understand the impact of structured finance with our post outlining the core advantages of budgeting.

The Gender Question

This article wouldn’t be complete without mentioning the elephant in the room: the idea that the term “girl math” supports the perception of women being bad with money.

In reality, women are not inherently worse at finances. In many ways, women are beating out their male counterparts.

For instance, credit scores between men and women are nearly identical. Men tend to carry more debt than women. Furthermore, women are more likely to use debit cards than credit cards and are better at following budgets when compared to their male counterparts.

The thing is, the rationale behind girl math isn’t exclusive to girls/women. Plenty of boys and men are out there using the same ideas to rationalize their purchases.

I.E., spending money on a golf course membership by defending how often you’ll use it or telling a significant other that an item only costs $100 when it really costs $130 (or much more).

The girl math videos on TikTok, YouTube, Instagram, etc., are not meant to be taken as an attack on gender differences, nor are they designed to impart actual financial advice. These videos are just light-hearted entertainment.

The post Girl Math: Valid Budgeting Technique or Dangerous TikTok Trend? appeared first on FinMasters.