You have learned about Creating Budget and Maintaining It and have taken the first step towards your financial journey. There are a lot of budgeting methods which you can consider when you are creating a budget or maintaining it. These different budgeting methods can be simple or complicated and thus most of them don’t actually work in real life. This makes it really hard to find one which actually works for you.
When you are creating a Budget, it should be particularly yours. That means you cannot take someone else’s method and apply it to your life which will never work. Everyone’s life and situation is differnt as well as the goals which they are creating the budget for. That’s why creating a budget for yourself is so very important and then there are some of teh simple budgeting methods which you can choose and tweak as per your needs.
Everyone of is different and unique and same should happen with our budget. So that means we have to manage our money to reflect who we are and thus it will be easier to maintain and stick to it.
In this article, we’ll discuss some of the most popular budgeting methods and provide you with a guide to finding the right one for you.
The Cash Envelope Budgeting System
When it comes to budgeting on a tight budget, the cash envelope budgeting system is one of the most popular options. This is for people who mostly uses Cash for everything.
With this system, you’ll assign each category of your budget—such as groceries, entertainment, rent, etc.—a specific envelope. And once that envelope is empty, you cannot spend more on that category for the month. That means if you have a $200 a month for grocery budget, you withdraw $200 in cash and then place that money into an envelop called “Groceries”.
It’s a great way to spend only what is required for that area and you are not overspending in that area. Plus, it can be really helpful for those who have a hard time sticking to a budget because it forces you to physically see how much money you have left in each category.
The 50/30/20 Budgeting Rule
The 50/30/20 budgeting rule is mainly for begineers to get started on your budget. This is mainly for people whi have just strated tracking their expense or simply started doing the Budgeting. In this your income will split into three categories which is essentials, wants, and savings.
The 50% for essentials is covering your necessary expenses like rent, groceries, and utilities. The 30% for wants is for discretionary spending like entertainment and dining out. And the 20% for savings is for long-term goals like retirement or a rainy day fund.
This approach can be a great way to get started on your budget because it’s easy to follow and helps you stay mindful of your spending. Now you can tweak this rule as per your own choice where you can increase the savings and reduce the wants need, but make sure you do not save too less.
The Zero-Sum Budgeting Method
Now, onto the zero-sum budgeting method. This approach is all about giving every dollar a job, so to speak. With this method, you first need to track all of your expenses for the month. Once you have that total, you then subtract your fixed expenses from your total income. This will give you the amount which you can save in a month.
Any money leftover after your fixed expenses are paid will go into savings or debt repayment. And if you spend more than your monthly allowance, then you’ll need to find ways to cut back in order to make up the difference.
This method can be a little more restrictive, but it’s a great way to get a handle on your spending and make progress on your financial goals.
Have a Spending Breakthrough With the “Pay Yourself First” Rule
One of the best budgeting methods you can use is the “pay yourself first” rule. It may sound simple, but it’s an effective way to make sure you are saving money and paying down debts. Here’s how it works: every time you receive a paycheck, you’re going to swipe a certain portion of it and commit that money to savings or or investment accounts. And then, you will use what’s left over for living expenses, bills and other expenses.
The percentage you set aside depends on your financial situation: it could be 5%, 10%, 20% or even more. The important thing is that it’s allocated first— before you have the chance to spend it on something else— so that you’re always focusing on putting money towards building your assets, not draining them.
Ultimately, once you start practicing “pay yourself first”, you’ll find yourself getting into good financial habits more quickly and effortlessly than ever before!
So, which budgeting method should you use to achieve your financial success? It depends on your specific goals and circumstances. But, no matter which method you choose, make sure to stay organized, be consistent, and be patient. With time and effort, you’ll be on your way to financial success!
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