Budgeting 101: How To Build A Budgeting System That Works For You

Budgeting can seem like a daunting task, especially if you’re not sure where to start. But don’t worry, we’ve got you covered with some simple tips and tricks to help you manage your money better and achieve your financial goals. We’re throwing bonus tips on how to avoid overdraft fees like a pro. Read on!

1. Budgeting 101

First, figure out what your net income, or the amount of money you bring home after deductions is, and then divide your expenses into fixed and variable expenses. Fixed expenses are ongoing and constant, such as rent/mortgage and car payments, and variable expenses change regularly, such as groceries, gas, and medical bills. Next, add all your expenses and compare your net income to determine which budgeting method is best for you. Use these free apps to help you track your expenses.

2. Budgeting Systems

There's no need to follow a budgeting system as long as you’re aware of your income and expenses. If you prefer more structure in your budgeting, there are a number of popular systems you can use:

- 50/30/20: 50% of your budget goes towards mandatory expenses (rent, utilities, etc.), 20% for savings or debt payments, and 30% for non-essential expenses. Good for: beginners and those who need to prioritize their spending.

- 70-20-10: A more flexible version of the previous system, this budget refers to the % of your take-home pay that you devote to spending, saving, and giving. Good for: someone who wants a simplified version of budgeting.

- 30-30-30-10: 30% of your budget is for housing (rent/mortgage), 30% for necessary expenses (utilities, gas, groceries), 30% for financial goals (debt, savings), and 10% for wants (dining out, entertainment). Good for: those prioritizing financial goals or who need to identify areas to cut back.

Helpful tip: Consider using a cash calendar to keep track of all your bills and payments.

3. Overdraft Fees

If your account has overdraft protection, instead of declining the payment, the bank will temporarily cover the transaction for a fee. You can opt-out of overdraft protection, but then you may incur non sufficient funds fees, usually between $10-$40. Signing up for banks or financial institutions that don't charge overdraft fees, like Clair, can help you avoid hefty charges.

4. Get Part of Your Paycheck Early with Clair

Clair gives you a portion of your next paycheck early, for free. This means no more resorting to high-interest payday lenders or fee-based loan services to pay off bills or buy everyday necessities before you get your paycheck. Now, you're in control of when you get paid.

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