How to manage bills and expenses

Surprises are nice, but not when it comes to your money. If you're scrambling to pay the bills each month, you would probably benefit from having a budget. Below are three methods for helping you stay on top of your monthly expenses.

1.  Fixed and flex budgeting

The first budgeting technique involves grouping your expenses into two categories: fixed and flex. Fixed expenses are must-haves like food and utilities. Flex expenses are the nice-to-haves like a new watch or a day at the spa. Keeping these definitions in mind, follow the four-step process below to build your fixed and flex budget:

1. Gather 6 to 12 months of bank statements, receipts, and other financial records.
2. Separate those expenses into fixed and flex columns.
3. Add up your monthly fixed expenses, then subtract the total from your monthly income.
4. What's left over is your flex spending money.

2.  The 50/30/20 rule

Another budgeting technique is the 50/30/20 rule. It involves dividing your monthly income into three buckets:

• 50% (or less) goes to necessities such as housing, student loans, and utilities. These are expenses you have to pay every month.
• 30% (or less) goes to nice-to-haves, such as entertainment, hobbies, and travel.
• 20% (or more, if possible) goes toward savings and paying down debt.

You can adjust the 50/30/20 rule based on your short- and long-term goals, but be careful about confusing nice-to-haves for necessities. Several dinners out each week and unlimited data plans may be nice to have, but they aren't essential.

3.  Track expenses

A third method for helping you organize and manage your spending is monthly expense tracking. It takes the most time, but it provides the greatest insight into your spending habits.

Use a spreadsheet, an online service or a notebook and pen.

First, create columns for your spending categories (e.g., groceries, gas, utilities, medical, entertainment, and child care). Add categories for miscellaneous/unexpected and for savings.

Next, divide your monthly income among the categories and then pay your bills and save accordingly. It's important to list all items and subtract the amount you spend in each category, so you know where your money is going. Once a category is out of money:

Stop spending in that category if possible, until you get your next paycheck.

Then consider making trade-offs by moving money around from other categories.

You can stretch your money in many directions. What you earn has to pay for daily expenses, entertainment, life events, and long-term goals. Budgeting can help ensure you’re covering the necessary monthly expenses while you save for the future. And hopefully, you'll have some extra cash to reward yourself for your good work.