Budgeting basics

Making it as pain-free as possible

Budgeting is a pain. But it’s more painful not being able to pay your bills, get out of debt or retire.

Fortunately, it’s easy to create a useful, working budget without watching every penny.

The following approach works best if you have a reasonably steady income that exceeds your basic expenses. If your income isn’t steady or doesn’t cover much more than the basics, you may need to track your spending more closely.

Also, no budget in the world can fix a true income shortfall. If you cannot pay for basic needs, you need more income, fewer expenses or outside help.

Otherwise, use the following steps to craft a spending plan.

1 Must-haves

Begin with your must-have costs. These include housing, utilities, food, transportation, insurance, minimum debt payments and child care that allows you to work.

Using the 50/30/20 budget, these costs ideally would consume no more than 50% of your after-tax income. That leaves 30% for wants and 20% for savings and extra debt payments.

If your must-haves exceed 50%, compensate by reducing what you spend on wants. Eventually, you can look for ways to reduce some basic expenses and achieve a better balance.

2 Automate

Automatic transfers can reduce the effort needed to achieve goals. If you only do one thing, automate your retirement savings to ensure you’re saving consistently.

Also consider saving money in separate accounts — often called “savings buckets” — to cover big, non-monthly expenses such as vacations and car repairs. Online banks typically allow you to set up multiple savings accounts without requiring minimum balances or charging fees.

3 What’s left

Subtract your must-have expenses, regular savings and debt payments. What’s left is your spending money for the month. (Nothing left? Try winnowing some of those must-haves or set less ambitious savings or debt pay-down goals.)

Pay for these expenses using one card or account to keep things simple. Check your balance every few days or set up alerts to know when you’re approaching your spending limit for the month.

A budget app or spreadsheet can help keep you on track over time.

Your budget won’t be perfect and you’ll have to adjust as you go. But at least you, and your money, will be headed in the right direction.