While there are many ways to budget, chances are there’s a method that works best for your personal financial situation, your financial goals, your spending and saving personality, or the type of habit that’s easiest for you personally, to stick to!
It simply cannot hurt to shop around (no pun intended!) the different techniques so you can choose the one that speaks to you.
Are you ready to supercharge your savings? Great! Let’s explore five fantastic budgeting strategies that will help you take control of your finances and curb any anxiety you may have accumulated over the years around budgeting:
The Weekly Allowance:
This strategy works on weekly budgeting. It's like the allowances you received as a kid – it allows for a set amount to spend as you please each week. Once it's gone, you'll have to wait until the next week. This approach ensures you won’t overspend, and makes budgeting engaging and manageable. Here what to do:
Step 1: After covering your essential expenses for the month (like rent or mortgage, groceries, and bills), divide the remaining funds into four equal parts, designating one part for each week. This becomes your discretionary spending allowance. For example, your family wants to go out for dinner or enjoy a movie, you'll use funds from your weekly allowance. Simple!
The 50-20-30 Budget:
In this approach, you will allocate 50% of your income to the non-negotiables, 20% for savings and debt, and 30% for family wants. This budgeting approach balances indulgence with financial responsibility. To break it down a bit more, you will:
Step 1: Allocate 50% of your monthly income towards essential expenses like rent or mortgage, groceries, transportation, healthcare, or childcare.
Step 2: Then 20% of your income will go towards savings and debt reduction, which means you're building an emergency fund, paying down credit card balances, and saving for your children's education and your retirement.
Step 3: The remaining 30% is put aside for discretionary spending. This includes occasional dining out, family entertainment, subscriptions, or perhaps a family vacation.
Zero-Based Budgeting:
This effective strategy makes sure that every dollar you have to spend is accounted for. You will list all your family's expenses, allocate your income, and aim for a total of zero. What does this look like? Read on!
Step 1: Start by listing your family's essential expenses, such as rent or mortgage, groceries, utilities, healthcare, and any amounts for savings such as for retirement or your child’s education.
Step 2: You allocate specific amounts to each category based on your best estimates. This can be done on a spreadsheet or with budgeting software.
Step 3: Subtract these estimated expenses from your total monthly income until your budget equals zero. Adjust as needed to make sure your expenses align with your income and goals!
Envelope Budgeting:
You read that correctly, this is involves actual envelopes! Remember those? Once you have your envelopes, you will label each one with essentials and discretionary spending. Put cash into these envelopes after covering your bills. It's a visual and tangible way to track expenses and stay on a budget. (Note: You could also use an App for this if preferred or easier for you, or even open a separate bank accounts for each budget category!). If interested in this strategy, you can follow these detailed instructions:
Step 1: Create labeled envelopes for various spending categories for your family, including essentials like groceries, healthcare, and mortgage or rent, as well as discretionary spending like dining out and entertainment.
Step 2: After receiving your paycheck, withdraw cash and allocate the appropriate amount to each envelope, based on your family's budget for the month.
Step 3: When you need to make a purchase within a specific category, take the money from the corresponding envelope. For instance, when dining out, use the funds from the "Restaurant" envelope.
Step 4: The envelope system helps your family visualize and control spending, providing a tangible way to manage your budget. It also encourages conscious spending and helps you avoid overspending in certain categories.
All of these strategies offer flexibility, control, and will help you build a renewed enthusiasm for budgeting. Considering your options and trying out a method that makes sense for you is the first step in transforming your financial future.
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