How to make a budget

Welcome to PocketGuard! We are grateful you joined our team. This Newbie's Guide was made to save your time and assist in setting up your profile correctly from scratch.

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Learn the Method

We strongly believe that an ability to get a quick overview of how you’re doing financially at any time of the day or night is as good as setting priorities while making purchasing decisions. Knowing what you need in the first turn is essential as it’s impossible to set up the budget and decide how much you can spend. You should realize your limits soberly to avoid any issues with your finances. Once you accept this truth, the “In My Pocket” feature takes action and turns into your trusted layer of financial protection before you make any purchase. This feature is the jewel of PocketGuard that saves your money. Its unique algorithm makes calculations based on your bills, income, savings goals' contributions, and ongoing expenses and shows how much money is left over for everyday spending.

How to budget your money

Budgeting shouldn’t be painful and restrictive. Want to go abroad for summer vacation? Have a little whim in buying Pumpkin Spice Latte every morning? All these things definitely should be included in your budget to keep up your mental health.

How to start a budget plan

PocketGuard is easy to use and user-friendly. To get started right, you just have to complete the journey of 5 simple steps:

Once you realize how you can benefit from using our online tool and get professional consultation from us, let’s get started! You can link bank accounts to start tracking transactions automatically or create a cash account manually if you want to get familiar with the app before entering bank credentials. Feel free to connect bank accounts anytime later and discover all the benefits of financial data aggregation, such as suspicious transactions monitoring, real-time accounts balances, and money management tools.

Budgeting techniques available right in PocketGuard

What’s your income?

Some people confuse the terms profits, income, and revenues. For instance, how would you estimate the so-called after-tax income? There are a few ways. If you get a regular paycheck, the amount you receive is probably it, but if you have automatic deductions for a 401(k), savings, and health and life insurance, add those back in to give yourself an accurate picture of your savings and expenditures.

However, if you work as a freelancer, have side hustles, earn hourly pay or overtime or rely on tips or commission, your monthly income is a bit harder to calculate. Take your income information for the past six months and calculate the monthly average. This will be your starting point. You can adjust it anytime later.

50/30/20 budgeting

Have you ever heard that 50% of your income should go towards your needs, 30% should be devoted to your desires, and 20% should go into savings and emergency funds? This rule is known as the 50/30/20 budgeting rule. It stands for a simplified plan offered by financial experts to manage expenses better. According to this plan, your spending can be divided into three categories, which include wants, needs, and savings.

Dividing needs from wants can be tricky. "Needs" include your only vital necessities. You might think that groceries are a need, but there are items that are "wants." For example, the fruits and vegetables you buy at the store are a need, while the choco candies are a "want." Be honest with yourself. Needs and wants shouldn't be mixed. Create separate sections or category budgets and name them “Needs,” “Wants,” and “Savings,” so you can divide expenses correctly.

Zero-based budgeting

Zero-based budgeting is a method that gives every dollar a job. The goal is that your income minus your expenses equal zero by the end of the month (make sure to set up your monthly budget when In My Pocket equals $0). This method is extremely effective but really hard to manage.

You can use the same expense categories and amounts every month. It looks the same as envelope budgeting, which involves distributing money for different expense categories into envelopes. One critical difference still exists. This method implies that a user allocates their full revenue ahead. Our application will prevent you from overspending, making it clear what you really need and what purchases you can postpone.

The problem is that following a zero-based budget eats up lots of time. If you are new to budgeting, we offer to start with more simple techniques like 50/30/20.

Envelope Budgeting

The envelope budgeting method involves allocating a set amount of cash to each budget category for the month. This is hard, but it works. To estimate the needed amounts, you need some historical data to check how much money you've previously spent for each category.

The envelope method works well when you feel that you are spending more than you can afford. If you can see how much cash remains in the particular envelope, you may understand when to stop wasting money.

Our software will help to categorize your spending by the relevant categories. You can then track them all easily. We recommend using PocketGuard “Spending & Budgets” to do the job well.

Compare and Adjust

How should you ever know whether you have achieved a balance in your budget? It seems pretty obvious and simple - it is necessary to compare your expenses to your income. The thing is that your expenses should not exceed revenues. If it is vice versa, it is about time to optimize your budget to avoid problems in the future.

An important thing about your adjustments is that you should focus on variable spending (such as your grocery or entertainment) before you reduce your savings for your financial goals and milestones.

Connect your bank accounts

First of all, you need to connect your checking, credit, and savings accounts, as this is what makes your budgeting smarter. We can tell you what you're spending, where to save, and remind you when credit card bills are due. The more accounts you link, the smarter your budgeting will be.

We’re serious about
security and protecting you

  • PocketGuard is committed to consumer privacy. We never have, and we never will sell your data under any circumstances.
  • PocketGuard doesn’t store your banking credentials. We partner with Plaid and Finicity (MasterCard company) for financial data aggregation, and we use an encrypted token system to download data from your bank.
  • We use bank-level AES-256 encryption to store your data in the Amazon Web Services (AWS) cloud. This is the same technology that the Department of Defense and the CIA use. We use Multi-Factor Authentication to prevent unauthorized access to your data on your device.

Set up your monthly income

Your monthly budget depends on your monthly income. Once you connect bank accounts, the PocketGuard sophisticated algorithm will automatically identify recurring expenses such as bills and income and categorize them accordingly. This part of the setup is crucial, as bills and paychecks are at the heart of every budget.

All you would have to do is to add income to calculations. PocketGuard makes budgeting for beginners simple from the first steps.

Add your bills

Creating a budget is the most important thing if you want to capture all spending and necessities and find out how much money you can save or spend. Bills, subscriptions, and other recurring payments are a huge part of your budget. Once you connect bank accounts, the app starts working as a finance tracker.

All your bills and subscriptions will be identified automatically and included in your monthly budget. The bill organizer will help you never miss the due date again.

Set up spending categories

Category budgets may come in handy when you want to set enough money for essentials, like food or transportation.

To create a budget, you will need to allocate a portion of money from your income. Thus you can even create a zero-based budget and give every dollar a job.

Once you connect bank accounts, the app identifies your transactions broken down by category. Our smart algorithm shows the average amount of money you have spent in the top categories.

Set up your savings goal

Expense tracking is just a part of the story. Personal finance is made of goals. Set up your savings goal using a SMART strategy. This means you have to make sure your target is Specific, Measurable, Achievable, Relevant and Timely. SMART.

Start a short-term deposit or use a specific savings account to save your target monthly contribution. Make sure this money is untouchable until you have the needed amount.

Create Your Plan

Congratulations! You have finished the main steps in your monthly budget setup. However, final customizations are up to you.

You can create as many sections as you need and categorize your bills and budgets under the purpose. Here’s the place where you can set up any budgeting technique or adjust your budget the way you want.

​​How to keep a budget

Once you’ve completed all customizations and included all items inside sections, you should remember a few things to keep your budget fresh and accurate:


Review your transactions

What you should do first is to check if all your merchants and categories have been correctly identified. To change the transaction category, just open its details, tap its category and choose the new one. PocketGuard will also learn from your preferences as it goes along.


Add custom categories

If the current number of categories is not enough given the diversity of your financial lifestyle, you can create your own custom categories. Choose an icon and enter the name, and voila.


Use #Hashtags

Add granularity to your spending with #hashtags. Just add a hashtag in the note field of a transaction and check Insights reports for the hashtags.

For example, you love to travel. Every trip includes loads of expenses falling into different categories: hotel booking, flight tickets, restaurants, gifts, etc. This way, it's hard for you to track the total spending for that trip to Paris.

But not with Mr. Hashtag to the rescue! Just put #wedding_trip in the note on the transactions and check how much money you have spent during the journey with your love.


Plan your income & expenses for the upcoming month

If the current number of categories is not enough given the diversity of your financial lifestyle, you can create your own custom categories. Choose an icon and enter the name, and voila.


Review spending pie-charts and reports

See all the expenses you've incurred over the current month divided into categories. It's the best way to see where your money goes.

Warning: some amounts might come as a shock: "Did I really spend that much on Alcohol & Bars last month?!" Yes, you did.


Don’t forget about goals

Whether you want to save money, it’s easier to do with Goals!

Right now, it may be hard to believe that you could be saving a little something every month, but you should try. You could make your monthly contribution as little as $30 this month. Any amount will incentivize you to become more frugal and make smarter financial decisions.

Choose a goal account and link it to your Goal. We will track the Goal progress and deduct monthly contributions from IN MY POCKET.


Setup debt payoff plan

Almost everyone has debts to pay off. Credit cards, student loans, mortgages, and car insurance. It is a real headache that takes a huge part in our financial life. Let us help you create a straight and clear plan based on your financial capabilities. All we ask you about is discipline and passion. Together, we will make you debt-free.


Find more savings opportunities

To help you save even more, we have gathered together the best financial services that can lower your bills, pay off your loans, cancel unwanted subscriptions, improve your credit score, get rebates on shopping, and more.

Answer a few questions about yourself in the Profile section, and you'll receive offers that are tailor-made for you.

Check for the recommended services in the Find Savings tab.

Budgeting is great, but it takes more than that to improve your finances, so don't miss the opportunity to discover more ways to save.

Record Your Spending

Tracking expenses is one of the most important things in budgeting. It requires discipline and passion. Spending a few minutes every day pays you a lot! PocketGuard has a few options on how you can track your money…

Automatic Data Aggregation

This option is great for the hands-off budgeter. So, we have mentioned that you may connect your banking accounts once in our system. What does it mean? The advantage is that the application can then auto-import all your transactions as soon as they’ve cleared your bank. The one downside: your budget will be on bank time, which means some transactions will take a few days to show up in your budget.

File-Based Import

If you don’t want to connect your accounts but want the convenience of imported transactions, file-based import is the perfect middle ground. You can simply upload a .csv file from your account and into PocketGuard anytime to get a record of your spending without entering transactions yourself.

Enter Transactions Yourself

Enter transactions in the app as you spend. It only takes about three seconds and gives you an instant status of your category balances. While it does take a little more time and effort than automatic import, the upside is you’re more likely to build great habits, and there’s no waiting for transactions to clear the bank!

Automatic Import + Enter Yourself

Entering transactions yourself offers heightened awareness and zero delay — your budget will always be completely up-to-date. Direct import ensures you don’t miss a single thing. You don’t even have to choose — you can do both!

Set Yourself Up To Success

You have your budget, you have your plan. Now what? Here’s a crash course on turning budgeting into a habit so you can build more wealth.

Sticking to budget

Whether our dreams come true or not depends heavily on our financial opportunities. Do you have an idea of what your future should look like? Then, it is time to master your budget and follow your plan!

Some people make it really difficult to make impulse purchases. Set up barriers, so you have time to stop and think: "Do I really need this stuff?" Remember, adding your debt load will not place you in a good position.

It's difficult to predict how much money you'll need in every life category. That's why it's important to have a regular check on how you've budgeted. If the current approach isn't working, tweak it. Use historical data to understand your spending habits and work on improvement.

Once again, make sure you keep your long-term financial goals in the picture.

Stop Creating Debt

You’ll never get out of debt if you continually add to your balances. Stop using your credit cards, but don't close the accounts because that will hurt your credit score.

Stop getting loans, so you cannot create additional debt. New debt increases the payments you have to make, which creates additional strain on your monthly income. It’s tough to live without credit cards, but if you’re serious about getting out of debt - find a way to live on your income.

Trim your expenses

If your budget shows your expenses outweigh your income, search for ways to cut back. One of the easiest ways to trim your expenses is to evaluate how much money you’re spending on the things you want but don’t necessarily need. For example, a Starbucks coffee costs about $5. Let's say you get it 2-3 times a week. See the room for improvement? Good!

Another way to cut your expenses is to see if you can lower the cost of services you use.

Every month is different

Some months you’ll have to budget for things like school supplies or car maintenance. Other months you’ll be saving for things like birthdays and holidays. Make sure you prepare for those expenses in the budget. Keep those things from sneaking up on you.

Be sure to adjust your budget each month as things change. This will protect you from stress. Have a plan to make things predictable.

Get everyone involved

Ensuring that you aren't the only person within the household keeping a budget. Make sure to get the entire family involved. This is crucial for sticking to a budget.

Talks about money are never easy. Unless you have enough to buy all the stuff around. If you have a family budget, all the family should know how much money you have this month to spend on all the things planned. This is important because every related person should keep in mind all those numbers to avoid overspending.

Once again, all those talks about money are not easy. Be patient explaining the family budget and why everyone should stick to it. This may cause some stress along the way, especially if you have never done that before. However, you are the only person who can take care of business and you'll do it for sure.

Analyze your data on a monthly basis

Setting SMART goals and tracking your spending habits is the most important part of budgeting. Analyzing this data each month can provide immediate feedback that allows you to tweak your budget.

Check the "Insights" tab to see your spending by category, merchant, hashtags, and other reports. This data allows you to make informed decisions. You can check these reports more often but try to keep in mind the bigger picture.

Don't forget about leisure

Make sure you set aside money for entertainment and leisure. After all, you were working hard to earn your money. You did an amazing job by sticking to a budget. You deserve to treat yourself from time to time. Such small things will keep you mentally healthy and happy.

Have a coffee in a place you like, hit a movie or a game. Do anything that makes you happy. Budgeting is not about stress. Budgeting is about being smart about money to make you feel comfortable.

Avoid Budgeting Mistakes

PocketGuard was designed to educate people and increase their financial literacy. Budgeting mistakes are common. The main question is whether you are able to fix them, make certain conclusions, and learn new things? Here’s our top financial mistakes that everyone should avoid.

Not having emergency fund

If you’re only budgeting for your monthly spending and not your savings, your budget may be doomed from the start. Bad things happen when we’re busy making other plans. Every reasonable budget needs a line for emergency savings. Are you one of those 39% of Americans who don’t have an extra $400 in the bank for life’s unexpected “blips”? Start fixing it now.

To avoid this budgeting mistake, make building your emergency savings a priority. Experts recommend an emergency fund of six weeks of your take-home pay. Try setting small, achievable goals first, like 5% of your income. If you follow the 50/30/20 pattern, you know that savings should take about 20% of your income. Build your emergency fund first, then move forward to another financial goal.

Ignoring data

A bulletproof budget begins with knowing how much you actually spend per living each month. Yes, it’s boring to sit down with all your bills and recurring charges to get accurate numbers. Those numbers are your key to a budget that works and drives you to the financial future you deserve.

To avoid this budgeting mistake, know your monthly expenses. Do not forget to consider how much money you take out of the ATM in cash. Make sure that your budget is real and accurately reflects all your monthly obligations.

Cutting out the fun

Having a budget might sound as if there’s no room for entertainment, but cutting fun out of your budget could become a really big mistake. It’s okay to want to pay off debts as quickly as possible, but you also need some money to keep your mental wellness. So, having fun is a must.

Remember the 50/30/20 pattern? 30% is for "wants." You can lower this limit if you're focused while achieving some financial goals right now. Keep in mind that you need a budget for fun and leisure to avoid burnout. A burnout person doesn't need a budget at all.

Your plans face real life

So, you sit down to make a budget. You follow the pattern, research your spending habits, and set spending limits. Now your budget seems almost perfect. You're satisfied with the work you've done and ready to meet your financial goals, but, life is life, as they say. Do your best to stay realistic with your expectations.

We told it a few times before but can repeat once again: review your budget every month to make it fit the current life situation. The best budget is one that drives a balance between your financial goals and daily life. Don't be too strict with yourself - anyone can fail. Adjust your budget when needed and move forward.

Build your budget

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