How to make a budget: Best apps and templates, cash-only budgeting and more

Illustration by Melanie Lambrick

It’s one thing to understand the importance of a budget—it’s another to actually stick to a budget. The budget is one of the most basic personal financial tools. It’s a monthly statement of your income and expenses that allows you to track where your money is going and ensure that your spending and savings are meeting your financial goals. Here are the basics and some simple rules to follow.

How should I start making a budget?

As valuable as a budget is, there’s a problem, writes The Globe’s personal finance columnist Rob Carrick: “Unfortunately, people really don’t use a budget to track their spending.”

With that in mind, the first step is to be honest about what type of budgeting solution is right for you. Are you a spreadsheet or app person? Are you likely to stick with regular budget reviews, or are you better off organizing a lot in the beginning so that everything happens automatically?

Financial planner Julia Chung organizes her budget using a multiple savings account system that automatically receives transfers on payday. It is similar to the method used by Mr. Carrick himself. “I have more than a dozen savings accounts at various banks, each labeled for a specific purpose,” he writes. “I have accounts where I gradually put money for insurance — life insurance premiums plus car and home — for vacations and home improvement, the down payment on our next car, and of course an emergency fund.”

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Another factor to think about is math—specifically, whether you’re afraid of it. People who are scared of math often have trouble with finances, too, says Vanessa Vakharia, founder of Math Guru, a tutoring studio and podcast host of math therapy. If that sounds like you, she recommends finding a kind, patient person in your life who is comfortable or good with money, and then asking them if they’d be willing to spend some time answering questions how to manage their budget money or other financial issues.

It’s also a good idea to reflect on your feelings about money and realize that they are part of the puzzle. “There is an emotional side to budgeting that is not discussed enough,” writes Mr. Carrick. “It can be a bit embarrassing to cut back while your Instagram feed continues to show you scenes of your friends and family living the lavish life.” He suggests having a standard phrase ready when they ask why you Not being able to participate in a particular activity or looking for cheaper options, such as, “I’m trying to get my finances in order in 2022, and I’m cutting back here and there to get there. Thank you for your understanding.”

The emotional side of money and budgeting is also an important piece of the puzzle.Drazen_/iStockPhoto/Getty Images

What is a cash only budget?

Spending with cards, smartphones and number chains on the Internet is not only technically virtual. Something about it doesn’t even feel real psychologically. And that can sometimes result in you spending more than you should.

If that sounds like you, one tool that might help is a cash-only budget. Essentially, this means you withdraw cash based on your budget — say, $75 a week for lunch — and that’s all you’re allowed to spend, no cards allowed. Some people use an envelope system for this: each budget category gets its own envelope, and cash goes into each envelope based on how much you’ve allocated to that category.

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Part of that, of course, is being disciplined enough not to pull out your credit cards when you run out of twenties. But with the right organization (perhaps recruiting someone to help), this method can be effective.

Mint, Dollarbird vs. YNAB: What Are the Best Budgeting Apps?

Budgeting apps can help automate the tracking of your expenses and provide an overall view of how you are reaching your financial goals. Look for an app that syncs with your bank account and credit cards and has features to help you enter purchases easily. Popular options include Mint, Dollarbird, and You Need a Budget.

Aashti Vijh from Toronto, for example, uses Dollarbird Pro to control her spending. “By entering my expenses every day, I’m much more aware of what I’m spending,” she says. “Compared to other budgeting apps that connect to your bank accounts and categorize your expenses for you, Dollarbird lets you be proactive with your finances instead of reactive.”

Your bank or other financial institution may also offer a budgeting app. For example, RBC Mobile includes Nomi, a tool that analyzes your spending, recommends a budget, and then sends you alerts to help you stay on track. And TD has an app called MySpend that gives you insight into your spending and helps you create and manage financial goals.

What are the best personal monthly budget templates?

The best template for your personal monthly budget is the one you actually use. If you search online, you can find many free options to try. You can also look at spreadsheet software like Excel, Google Sheets, or Apple’s Numbers that come with ready-to-use budgeting and savings templates.

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Look for a template that is intuitive to use and that you can customize to fit your personal spending and savings categories. Download a few options and play around with them to see which you like best.

What is the 50/30/20 rule?

A well-known budgeting system is the 50/30/20 rule, which uses 50 percent of your income for necessities like food and rent, 30 percent for things you want, and 20 percent for savings and paying off debt. It’s a common way to allocate money because it’s simple and less restrictive than other techniques.

This method works for many people, but it may not be right for you if necessities eat up more than 50 percent. In this case, you have less to set aside for savings or things you want to do or buy.

What is a good credit card budgeting app?

You can start with your credit card provider’s app. “Credit card apps are a handy way to track your spending on the fly, including transactions that are both posted to your account and pending,” writes Mr. Carrick. “Card apps also help you keep track of the space on your card and your total rewards points.” Additionally, general budgeting apps should factor your credit cards into your overall budget picture.

The final result

The best budget is what you actually use. Be honest with yourself about what budget management habits you’re really going to stick with And Change your spending and saving routines. Just like fitness, consistency is the key to success.

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