In recent times, there has been a significant growth in the number of smartphone users and number and types of mobile applications (apps). Such a trend has resulted in increased Internet data consumption, particularly for users of “data hungry” apps. Thus, smartphone apps should be allocated to their required budget to minimize resource wastage without compromising on user’s quality of experience. In this paper, we develop a prioritized and dynamic budget allocation policy framework for ensuring an optimal budget allocation to each app as well as improving system performance. We formulate the optimal Internet data budget management (O-IDM) problem as a mixed-integer nonlinear programming (MINLP) problem, which maximizes the resource utilization and minimizes user penalties. We also employ runtime monitoring technique to estimate future bandwidth utilization so as to ensure budget reservation as close as to the required amount. A heuristic Internet data budget management algorithm (H-IDM) is also presented, which is designed to reduce time complexity and computational overhead of the O-IDM system. The experimental results from test-bed implementation demonstrate the effectiveness of the proposed IDM systems, in comparison to state-of-the-art approaches.