5 Practical tips to better manage your monthly budget
Here are 5 practical tips to manage your monthly budget like a pro. Find out how to rework your spending habits and start building healthy savings for the long term.
6 min read
Do you start each month promising to save money, but then find yourself struggling to make ends meet before your next payday? It’s a tough cycle to break, but there are ways to turn your finances around. Here are 5 practical tips to manage your monthly budget like a pro. Find out how to rework your spending habits and start building healthy savings for the long term.
1. Identify your personal goals and motivations
A lot of people struggle to build up their savings. Even if you put money aside periodically, unforeseen expenses or impulsive purchases can make your hard work feel inconsequential. The first thing you can do to prevent this feeling is to give meaning to your savings. It’ll become a lot easier to manage your budget when you have a specific goal to achieve.Having a clear vision of your objectives will allow you to set a precise course of action. Every step you make toward saving will no longer feel like a random or isolated action. Instead, it will become a valuable step toward achieving your desired goal. Here are some common goals to inspire your saving efforts:
Buying a home
Accomplishing a personal project, like getting a degree or starting a company
Financing an event, like a vacation or wedding
Now, here are some things you can do to help you reach those goals:
Set a specific deadline and define a clear plan to reach your goal.
Write down your commitments in order to visualise your goal more concretely.
Regularly adjust the goal to be reached so that your projects remain realistic.
Celebrate your successes along the way.
Save up with Spaces
Use N26 Spaces sub-accounts to easily organize your money and save up for your goals.
Once you set your goals clearly, it’s important to track your progress. Seeing your hard work add up will help keep you motivated to continue working toward your goals. But this doesn’t just mean watching your savings pile grow. You also should keep an eye on where you’re spending money. This will help you identify areas where you can cut back, even if just temporarily. You can keep track of your expenses in two ways:
In euros, to have a structured idea of exactly how much cash you’ll need for which areas (e.g., €500 in fixed costs, €300 in variable costs, and €200 in savings).
In percentages, so you can compare one expense against another and make sure your budget is balanced this way. Keep a balanced budget (e.g., 50% fixed charges, 30% variable charges, and 20% savings).
No matter what kind of expenses you have, you will probably need to implement some changes to your spending habits in order to improve your budget and save more money.
3. Try the 50-30-20 rule
If you’re looking for a foundation to start building your budget, you might want to try the 50-30-20 savings rule. This method came from Senator Elizabeth Warren, who introduced the idea in her book All Your Worth: The Ultimate Lifetime Money Plan.With the 50-30-20 rule, you’ll divide your income (after tax) into three categories
50% of your income goes toward basic needs (e.g., food, rent, health)
30% goes toward your wants (e.g., restaurant, vacation, shopping)
20% savings
Depending on your income, you might change the distribution of your spending—maybe you’ll need to spend more of your income on rent, or can reduce your rent to a smaller percentage. The important thing to remember is to keep your savings as close to 20% as possible, no matter what. As you get more comfortable using the 50-30-20 rule, you will have an easier time distinguishing between your needs and wants. For instance, public transport would be considered a need, while a €50,000 car would be more of a want. Purchasing basic clothes is a necessity, but buying your tenth pair of shoes is probably just a want.
4. Automate your savings and investments
Automatic transfers can make it easy to follow through with your savings. Send money between bank accounts or sub-accounts without having to remember to make a manual transfer every time.Let’s imagine you use automatic transfers to help you implement the 50-30-20 rule:
First, you’ll receive your income into a checking account.
Set up an automatic transfer to send 30% of this money to another account used to cover your wants.
Keep a third account just for saving, where you automatically send 20% of your income as soon as it comes in.
This way, your main account will always have the 50% of your income ready for necessary expenses. And you’ll never have to worry about mixing up your money for wants with the money you should be saving for the long term. The advantages of automating your savings
Once you decide how much money you want to send to each account, you don’t have to think about it again—and there’s no way you can forget.
Watch your savings grow over time, without having to think about anything except your day-to-day spending.
You’ll have a clear mental picture of your budget, and be easily able to check your progress toward achieving your personal goals.
Automatic transfers are easy to set up, so any time you decide you want to ramp up your savings, you can do so in just a few simple steps.
5. Make sure to set aside money for your own enjoyment
When implementing the 50-30-20 rule, it can be tempting to slash your wants excessively in order to save faster. While this is a good method for making quick progress in the short term, if you want to make budgeting a part of your life for the long term, you need to leave some room for activities you enjoy. The harder you are on yourself in the beginning, the more tempting it will be to give up in the beginning. Taking sports classes, buying books or magazines, subscribing to new streaming services, indulging in good food—these are all ways to reward yourself periodically, and as long as you plan for these expenditures in advance, they don’t have to break your budget.
The bank account that gives you more control
Spend and save with confidence, and discover a better way to manage your money
Take control of your budget with N26. Every N26 account includes Insights, the feature that lets you see all your monthly spending at a glance. Find out where your money is going so you can easily see where you can make changes. Or, open any premium account to get access to up to 10 Spaces sub-accounts that sit alongside your main account. Give each space a unique name, set your own goal to strive for, and automate transfers to watch your savings grow. Plus, you’ll get push notifications in real time, whenever money enters or leaves your account. That way you’ll always know what’s going on with your balance. N26 You and N26 Metal customers have the added security of extensive insurance offerings, including pandemic-proof travel insurance, emergency medical coverage, and more. Compare all of our account plans to find the one that’s right for you.
Improving your financial health and boosting your savings might be easier than you think. From joining the gig economy to selling your spare stuff, find out how to easily make and save more money.
With some smart planning and budgeting, you can get your dream bathroom. Here, we break down the main costs to expect and share tips for saving money on your bathroom remodel.
Improving your financial health and boosting your savings might be easier than you think. From joining the gig economy to selling your spare stuff, find out how to easily make and save more money.
With some smart planning and budgeting, you can get your dream bathroom. Here, we break down the main costs to expect and share tips for saving money on your bathroom remodel.
