MoneyLife

Budgeting Basics 101 

By Grace Kilander
budgeting basics

The first step to budgeting is understanding your current finances. We all spend money on things we don’t really need, so start there. Put together a monthly spending tracker and report back with how much you spent on things like food, electricity, or even entertainment. You might be shocked to see just how much you’re spending without realizing it.

Read on to find out why budgeting basics are so important and how to master the art of managing your finances. 

Why do I need a budget?

If there is one thing we can say with certainty, it’s that budgeting is hard. But it doesn’t have to be!

The key to successful budgeting is tracking where your money is going and knowing when you have enough cash to cover your expenses. Keeping track of your spending habits will allow you to see where you can cut back and save for the future. 

That being said, if you have a lot of debt, now might not be the best time to try and save as those monthly payments will eat into any savings that might happen. Instead, find a way to make more money, lower those monthly payments with a side gig, or by paying down your debt ASAP!

Tips for better budgeting

Creating a budget is a good way to manage your money better. Budgets help you allocate your resources to meet your needs and goals. It’s not easy, but if you try, you can do it- especially if you have patience and knowledge. Begin by using these easy tips and tricks. 

Understand what you earn and spend

It is important to know what you earn and what you spend so you can manage your money better.

The first step is tracking your expenses, be conscious of how much you spend on items like groceries, entertainment, and clothing.

The next step is to find out where all your money goes. If it’s too difficult to do the math on a calculator for all the details, use the RoarMoney spend tracker in the MoneyLion app. It will help you with this part by categorizing every purchase into different categories. 

Our MoneyLion app is free to download and offers an easy-to-use interface that allows you to see all of your transactions in one place. You can then set up a direct deposit and our Safety Net feature can easily view them all in one place – rather than shuffling through receipts or bank statements every time you want to figure out where your money went! 

Once you know where all your money goes when it’s time to divide up that amount of money into three different categories: fixed costs (rent/mortgage/car payments), variable costs (groceries/gas), and flexible costs. 

Establish small and short-term goals

Going through a tough financial time? Then you know the importance to make goals and get back on track. Short-term goals can help you stay afloat and pay off any debt – it’s better than not having anything set out.

If you want to establish small and short-term goals, create a budget that will help keep your finances in check. It’s better if you have an emergency fund that can help with any unexpected expenses that may come up in the future. You should also be aware of how much money is coming into your bank account and how much money is going out of it for various purposes like groceries, bills, and necessities. 

The MoneyLion Safety Net feature is the perfect way to set up an emergency account. Simply set up a direct deposit to your RoarMoney account and you’ll automatically have access to Safety Net and its perks like up to $1000 Instacash and an early payday by up to 2 days! 

Make a budget and stick to it

Although it might be tempting to buy a new t.v or take a weekender vacation, sticking to a budget and paying off debt feels better– long term. Write out our budget and make a promise to yourself that you’ll stick to it.

It might be helpful to put a copy of your monthly budget in your home, as a screensaver on your phone, and give yourself a small reward when you hit your goals. 

With the RoarMoney spend tracker, you can see where your spending goes by category. If you see yourself trailing off, reevaluate and cut back where needed.

Check out this comprehensive article on how to create a budget.

Plan for emergencies

It’s a good idea to have a plan for emergencies you might face. Make sure you put some money aside so that if anything happens it won’t be too hard on your wallet. You can also do some extra stuff once in a while, like driving Uber or sell unused items in your home. 

With a MoneyLion investment account, you can easily automate a small amount of cash to stow away into a diversified ETF portfolio and maximize your hard-earned money. 

Dedicate a certain about to need, wants, and future

The only way to make sure you are not living paycheck-to-paycheck is by budgeting and allocating a percentage of your income towards needs, wants and future needs.

If you use the 50/30/20 rule, you will know that 20% of your income should be allocated towards future needs such as retirement. You need to set aside savings for emergencies like car repairs or when your appliances break down.

When it comes to wants, it is important not to go overboard. If you have a lot of debt, it is recommended that 40% of your take-home pay goes toward paying off debts so that you can get out from under them quicker.

Finally, 30% should be allocated towards needs such as groceries and gas so that these things don’t interfere with other important bills. 

Create a debt repayment plan 

It is important to have a clear plan to repay your debts. This includes your credit cards, student loans, and bills. The most important part of the plan is to understand how much money you have coming in, how much you are spending and the amount of money that you owe.

A good way to do this is by creating a debt repayment plan for each month with one-cent values corresponding to each payment. For example, if I have $1000 in credit card debt that needs to be paid off over 10 years, then I would need $100 per month to make my monthly payments.

The last thing you want to do is miss payments and get slapped with expensive fees and high interest rates, which will ultimately result in more money out of your pocket. 

Snowball and allocate funds towards the future

Saving money are paying off your debts quickly is critical but putting away funds to invest has major long-term benefits. For example, if you were paying $200 a month towards your car payment, you pay off your car. Allocate that $200 towards the next debt of importance. You’ll do this with each debt and eventually you’ll have large lump sums that get thrown on debt each month. 

Once you begin snowballing your debt payments, you will be able to put more money toward funding investments and future goals. Eventually, you’ll pay off all your debts, and the total amount of debt you’ve been paying can now funnel into savings and future investments. 

Invest wisely with MoneyLion

Now that you know how to budget, you can start stashing away money for your retirement and future. A MoneyLion investment account allows you to invest as little as $5 each month. Choose whatever investing approach you’re comfortable with, from an aggressive investor approach to the casual newbie–we have every option for you!

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