Updated: Mar 3, 2021
We all know budgeting is important but we don't want to do it. The misconception is that budgeting is restrictive and is only for poor people. But that is far from true. If you have financial goals or life goals in general, you gotta budget. You need to know how much money you have coming in and going out otherwise, you will be stuck where you are.
There are various ways to budget your money and I have used, in some form, all the ones I am going to mention below. Please remember, the best budget is the one that works for you. So lets get to it.
The 50/20/30 method is one that I actually used first before I even realized it, lol. My bank has some budgeting tools and I was using it there. Basically, with this one, you allocate 50% of your income to your needs and obligations. So this could be your rent, car payments, mortgages, utilities, etc. These are the "must haves". Not things like streaming services and eating out. 30% is allocated to your wants. This is where the streaming services and eating out come into play. 20% is allocated to your savings and investments. This means adding money to an emergency fund, savings accounts, investment and retirement accounts. You may also consider using this category to pay off extra debt.
I have used this method sorta. I am not actually a cash spender but I did do this in a virtual way having virtual categories for as the cash envelope. Basically, you use cash anywhere possible. If you automate your regular bills, anything else, you pull out in cash, stuff envelopes and track your spending on the envelopes. This is a great way to manage your spending because once the cash is gone from the envelope, that's it until you refill. The down fall to this method, not caring your cash around which may cause you to use your card. So having a plan on when and where you spend is a must.
This method scares me the most. lol But that's only because I am OCD. Basically with a zero-based budget, you simply create a budget that has a remaining balance of 0. This doesn't mean you have 0 dollars in your account, it just means that every dollar has a place or a job and you can visually see this and stick to your budget. This method alone can be difficult because it doesn't allow for irregular spending so you have to really pay close attention to what is going on.
Budget by paycheck
Probably my favorite way to budget. I learned about this method a few years ago and immediately fell in love. You budget you money based on when you get a paycheck. So if you get paid the 1st and the 15th, you would create a budget with your income and expenses that occur from the 1st to the 14th. Then start the process again for the 15th through the end of the month. This way works really well because you can see if you have more bills at the beginning of the month of the end of the month and make adjustments. You can also, split payments for debt between both checks and have a little extra money available. This method also incorporates the cash envelop and zero-based methods into it. When I first tried this method, I was able to FIND an additional $4,000 in my budget over 3 months to allow me to make extra payments to my student loan.
The bottom line, you are the captain of your financial ship and you will know which method works best for YOU. Just make sure your budget is realistic, you monitor it, and adjust. The first few months will be hard but that's good. Don't give up. Always remember your why.
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