A personal budget can really change the direction of your life.
Having the ability to track and monitor your spending gives you the power to advance your personal life goals.
Here are five different types of personal budget methods you can try.
1. The Zero-Based Budget
This budget is more suited for those that have some budgeting experience or those with a fixed income each month.
It’s not recommended for those that are new to budgeting.
The Zero-based budget pretty much explains itself. You determine your monthly income and subtract all of your monthly expenses and savings.
The end result should be zero.
This budget does not leave much room for error though.
You can move money around to different categories to compensate for spending more in another category.
2. The Pay-Yourself-First Budget
The Pay-Yourself-First Budget, means that you are paying your savings and debt repayment first.
Whatever money is left after paying into these two categories, you are free to spend.
You don’t really have to track all of your expenses with this budget method. Because you are paying your savings and debts first, so the rest of the money is for you to spend on whatever you may desire.
This budgeting method is ideal for those struggling to save money every month.
3. The Envelope System Budget
You got it! This method involves envelopes and cash.
Basically, you have envelopes at home that are categorized and you put a certain amount of money in those envelopes to spend on those specified categories.
It is a very simple way to manage your money from the comfort of your own home.
I’m not entirely sure how old this method is but it feels like has been around for quite a while.
You can move money around easily with this method, if you need to, just remove it from a different envelope.
If you are uncomfortable carrying around that kind of cash, probably best to steer clear of this one.
4. The 50/30/20 Budget
This budget method has gained quite a bit of momentum over the years because of it’s basic concept.
It can also be changed to fit your needs.
Your income is broken down into three categories.
The first, necessary (needs) expenses, which gets allotted the most (50%) of your income. These are the expenses you have to pay to live your regular day to day life. Rent, mortgage, loan payments, vehicle payments, insurance, utilities, groceries, etc….
Second, you have your discretionary (wants) expenses, which gets allocated 30% of your monthly income.
This category includes eating out, subscriptions (streaming, etc..), vacation, entertainment, etc…
And the third category, is your savings, with 20% of your monthly income ending up there.
It’s not written in stone, so you can move money around and adjust this budget method to fit your goals better.
But you must understand the difference between a want and a need.
You could easily take away from the necessary expenses if they are not too high and allocate that left over money to your savings.
This method is not ideal for those with high debt or large savings goals.
5. The No-Budget Budget Method
The No-Budget method, really just involves you keeping an eye on your checking account.
Being aware of the amount you are spending.
You just have to spend within your means, setting aside funds for your savings and debt.
This is a simple budgeting method best to be used with a debit card and a good banking app from your financial institution.
It’s flexible, in that, you can spend whatever you want as long as you don’t overdraft your account. So make sure you know when those recurring monthly bills are due and be sure you have the funds in your checking account.
This method is good if you don’t want to track all of your expenses.
Conclusion
If you have financial goals you are chasing, one of the best actions you can take towards making those goals a reality is, creating and maintaining a personal budget.
A personal budget gives you insight into your spending habits and can help you determine what you could give up in your life to reach your goals faster.
Budgeting can be a little involved sometimes and it can take some of your free time up getting started. But once you get your method in place and begin to follow it, you will start to see that your goals are obtainable.
Personal budgets provide MOTIVATION!!
Don’t worry if it seems slow at first, it usually takes a few months to get adjusted to your budgeting method. Like anything, the more you do it, the easier it becomes.
Hopefully, this article will help you begin your own personal budget journey and lead you to your financial goals.
Find motivation in reflecting on your goals and why you want to reach them.