“A budget is people telling their money where to go instead of
wondering where it went.”
In this guide, I’ll walk you through the step-by-step process of creating a budget that works for you and your financial goals.
Whether you’re just starting or looking for ways to streamline your current budgeting process, this guide will help you build a solid foundation for financial stability. With patience and perseverance, you’ll be on your way to reaching your financial goals in no time!
Table of Contents
- STEP 1: List All Monthly Income
- STEP 2: List All Expenses
- STEP 3: Calculate The Difference
- STEP 4: Budget the Remaining Income
- STEP 5: Regularly Balance Your Budget
- STEP 6: Use AI Tools & Apps
STEP 1: List All Monthly Income
Begin by accurately listing all sources of monthly income, including regular paychecks, side hustles, and investment income. This comprehensive understanding of your total monthly income lays the foundation for your budget.
STEP 2: List All Expenses
Categorize your expenses into fixed and variable costs.
- Fixed Expenses: Regular, unchanged expenses like rent or mortgage payments, insurance premiums, loan repayments, property taxes, subscription services, internet and cable bills, and gym memberships.
- Variable Expenses: Costs that fluctuate each month, such as groceries, utility bills, transportation costs, dining out and entertainment, clothing, home maintenance, travel expenses, medical expenses, gifts and donations, and education expenses.. Unlike fixed expenses, these costs can vary, making them somewhat challenging to predict. However, there are strategies to manage them effectively.
To budget for variable expenses, start by tracking your spending in these categories for a few months to establish an average. For instance, monitor your transportation costs over 2-3 months. This will give you a baseline to understand typical fluctuations. Then, set a budget amount slightly higher than this average to account for unexpected variances.
STEP 3: Calculate The Difference
Subtract your total expenses from your income. If negative, consider creating a minimalistic budget, reducing your expenses, and exploring ways to increase income.
STEP 4: Budget the Remaining Income
Allocate every dollar of your income to specific categories for a balanced budget.
- Miscellaneous: Set aside a small amount, like $50, for unforeseen expenses.
- Emergency Fund: Prioritize a 30-day emergency fund.
- Investments: Invest at least 10% of your income in low-risk options like index funds.
- Long-Term Savings: Identify future savings goals and determine a monthly saving amount.
- Discretionary Spending: Non-essential spending like entertainment, travel, and personal care.
STEP 5: Regularly Balance Your Budget
At each month’s end, evaluate your expenses to ensure they align with your values and goals. Adjust your budget as needed.
STEP 6: Use AI Tools & Apps
AI-driven budgeting tools offer a blend of convenience, automation, and personalization in managing personal finances.
These tools use advanced algorithms to analyze financial data, providing actionable insights and recommendations.
The Top AI-Powered Budgeting Apps
In my quest to find the best budgeting apps, I've personally tested a variety of them, including Emma, Rocket Money, Simplifi, CLEO, Plum, and Budget Pulse. My selection criteria were based on both user ratings and my own experiences with each app.
After thorough testing and evaluation, my top three choices are Simplifi, Rocket Money, and Emma.
Each of these apps excels in fundamental aspects such as the ability to rename transactions, mark them as recurring, customize categories, track overall net worth, and offer fast, priority support.
However, each app has its unique strengths and weaknesses. Some features present in one app may be absent in another, leading me to the conclusion that using more than one app could be necessary to cover all bases. The differences in their feature sets make them suitable for various needs and preferences in budgeting, which can be seen in this table:
| Feature: | Emma | Rocket Money | Simplifi |
|---|---|---|---|
| Searchable Transactions: | ✅ | ❌ | ✅ |
| Cashback: | ✅ | ❌ | ❌ |
| Auto Savings: | ❌ | ✅ | ❌ |
| Rolling Budgets | ✅ | Unsure | ✅ |
| Reduces Expenses: | ❌ | ✅ | ❌ |
| Price: | Free – $10.42 | Choose Your Price | $48 per year |
This exploration into budgeting apps has been an enlightening journey, revealing the diverse functionalities and user experiences these tools offer. The choice of the best app can vary depending on individual requirements and the specific financial management aspects one prioritizes.
Below, you can take a closer look at each app and it's features and benefits.
#3: EMMA
Emma, launched in 2018, positions itself as a financial tracker akin to a fitness app. It's geared towards those looking for a user-friendly and versatile money management tool. Available for both iOS and Android users, the setup is a breeze, allowing sign-up through various mediums and linking to a wide range of financial institutions.
Comprehensive Financial Tracking
Emma's real-time financial tracking covers everything from bank accounts to investments. Its comprehensive view makes monitoring your financial status from payday to payday quite straightforward. This level of detail in tracking is particularly useful for those who like to have a finger on the pulse of their finances.
Budgeting and Analytics
Emma stands out with its budgeting tools. The app doesn't just track spending; it also analyzes your typical monthly spending and suggests a total budget. Its ability to notify you if you're straying from your budget is an excellent feature for maintaining financial discipline. The customization options in the ‘Analytics' and ‘Budgets' sections further enhance its utility.
Subscription Tracking and Savings Integration
Another feature worth noting is the subscription tracker. It identifies and alerts you about unused subscriptions, potentially saving unnecessary costs. Emma also offers integrated cash back savings accounts with competitive interest rates, such as the Emma Easy Access Pot, complete with FSCS protection. The investment feature, allowing you to start with as little as $1, is a noteworthy addition, integrating investment options within the app itself.
Usability and Personalization
Emma's user-friendly and vibrant interface makes financial management less of a chore. The ability to personalize accounts with colors and icons, coupled with informative visuals like graphs and pie charts, enhances the overall user experience. This focus on an intuitive design is a significant plus, making it easier for users to navigate and understand their financial situation.
Security and Accessibility
Security is a strong suit for Emma, employing bank-grade encryption to protect user data. The app's commitment to security is further evidenced by its FCA and ICO registrations, ensuring a high level of trust and reliability.
My Personal Take on Emma
From my experience, Emma excels in many areas. The dashboard is intuitive, providing a wealth of visualizations and easy navigation. The ability to manually edit transactions, search for them, and add custom categories – features essential in a budgeting app – are all seamlessly integrated.
However, a quirky feature is the app's “millionaire prediction” tool, which estimates the time it will take to reach a net worth of one million. While it's an interesting concept, the predictions, based on algorithms, may not always align with personal financial goals, leading to some unrealistic forecasts.
Conclusion
Overall, Emma offers a solid package for effective money management. While it has its quirks, like the net worth prediction tool, its strengths in budgeting, account tracking, and user experience make it a valuable tool for anyone looking to get a better handle on their finances. Emma's approach to financial management is well-rounded, making it an appealing choice for a wide range of users.
#2: Rocket Money
Rocket Money, formerly Truebill, offers a comprehensive approach to personal finance management. This app, in my experience, acts as a financial hub, bringing together various accounts for a full financial picture.
Account Integration and Financial Overview
Linking bank, credit, and investment accounts is straightforward. This consolidated view helps in understanding overall financial health, a crucial aspect for anyone keen on getting their finances in order.
Subscription Management and Bill Negotiation
The app's ability to track and manage subscriptions is a standout. It’s like having a financial watchdog, identifying and helping to cut down on unnecessary recurring expenses. The bill negotiation feature is equally impressive, often securing savings on regular expenses like utilities and phone bills.
Automatic Savings – A Closer Look
One of Rocket Money's features that I find particularly innovative is its automatic savings tool. This feature works discreetly in the background, analyzing your spending patterns and safely transferring excess funds to a savings account. It's designed to adapt to your financial behavior, ensuring that savings are accumulated without impacting your daily expenses or causing overdrafts.
I see this as a smart way to build savings incrementally, almost without noticing it. This feature alone makes Rocket Money a valuable tool in my financial toolkit, especially for setting aside funds for emergencies or future investments.
Credit Score Improvement and Financial Insights
Rocket Money’s partnership with StellarFi to improve credit scores is another feature worth mentioning. By adding regular payments like rent and utilities to your credit profile, it can potentially give your credit score a boost, which is a significant advantage for long-term financial health.
User Experience and Interface
The app’s interface is clean and user-friendly, making navigation through various features quite seamless. This ease of use enhances the overall experience of managing finances through the app.
Critiques and Areas for Improvement
However, the app isn’t flawless. I've noticed some inaccuracies in transaction reporting, which can be a major concern for precise budget tracking. Additionally, the lack of a search function for transactions is a noticeable omission. These issues can sometimes undermine the trust in the app's data accuracy, which is vital for effective budget management.
Conclusion
In conclusion, while Rocket Money has its shortcomings, particularly in transaction accuracy and search functionality, its strengths in automatic savings, bill negotiation, and potential credit score improvement make it a valuable tool in my financial management arsenal. It's an app I'll continue to use, primarily for its unique features that aren't readily available in other budgeting apps.
For anyone interested in exploring Rocket Money further, I recommend visiting their official website for more detailed information and user experiences.
#1: Simplifi
Tons of Features like Savings Goals
The app really stands out with its savings goals feature. It lets you save for various objectives like an emergency fund and sets a specific date to achieve each goal. This is cleverly integrated into your monthly budget, making it a practical tool for financial planning.
Watch List for Focused Spending Monitoring
Another highlight is the watch list feature, which keeps an eye on spending for specific payees, categories, or tags. This is incredibly useful for staying within budget limits and avoiding overspending.
Customizable Visualizations and Dashboard
In terms of customization, this app exceeds its peers like Emma and Rocket Money. The level of personalization available in the dashboard and visualizations gives you a lot of control over how you view and interact with your financial data.
Comprehensive Asset and Achievement Tracking
The app's ability to add a variety of assets, including loans, debts, and investments, is commendable. Also, the addition of achievements for milestones like not overspending or reaching a certain net worth gamifies budgeting, which I find motivating.
Unique Feature: Refund Tracking
A feature that sets this app apart is the ability to mark transactions as ‘refund pending' and track the status of the refund. This level of detail in transaction management is something I haven't seen in many other budgeting apps.
Detailed Reporting for In-Depth Analysis
The app provides comprehensive reports like total spending, monthly spending, net income by month, savings, net worth, monthly summaries, and refund tracking. These reports offer valuable insights into your financial health and progress.
Stability and Reliability
Given that this app is a product by Quicken, it brings a sense of stability and longevity that some other apps may lack. While I have a fond
Stability and Reliability
Given that this app is a product by Quicken, it brings a sense of stability and longevity that some other apps may lack. While I have a fondness for Emma, its future, like many budgeting apps, can seem uncertain. The backing by a well-established company like Quicken reassures me that this app is likely to stick around for the long haul, unlike some others in the market.
Overall Impression
This app impresses with its comprehensive features, outshining others like Emma and Rocket Money in several aspects. Despite missing out on functionalities like auto-saving and cashback – which are more bonuses than essentials in budgeting – it covers nearly every feature and benefit I was looking for in a budgeting app. The ability to track a wide array of financial aspects, coupled with the unique refund tracking feature, makes it an essential tool in my financial toolkit. The robust reporting features provide an in-depth look into various financial metrics, enhancing the overall utility of the app.
In conclusion, this app's blend of comprehensive features, customization options, and the backing of a reputable company makes it a top choice for anyone serious about budgeting and financial management.