Many people start budgeting, intending to really make it work. Unfortunately, most people quickly return to lousy spending habits once they fail to stick to their budget. The key to establishing a budget that works for you is to realize that there’s no one-size-fits-all solution when it comes to managing your money.
In fact, there are tons of budgeting strategies out there, precisely because what works for one person may not work for the other. Ever tried a budgeting method and failed at it? Don’t give up just yet. Try these eight practical budgeting strategies at least once – chances are, you’ll find one that fits your needs perfectly.
It’s Impossible to Be Smart With Money Without a Budget
No one can force you to have a budget – in fact, a lot of people don’t have one. However, not having any semblance of a budget is the first and biggest mistake of managing your money. Here’s why:
Having a good salary doesn’t equal financial security
A high income is not equal to financial security. Even with an excellent salary, many individuals struggle with paying their bills. Why? Because it’s all too easy to spend so much more than you earn.
Studies show that people tend to spend more every time they get a salary increase. That’s why it’s not unusual to see a high-income earner straddled with a ton of debt.
Knowing how to budget your money— no matter how big or small— is the real key to financial security. It allows you to optimize your income. With a good budget, you’re able to pay your bills, reserve some for savings, pay for insurance, and have fun money out of your income.
A budget will help you save for your future
Sure, you can start saving for things like your own home, retirement, or a dream vacation anytime you want. But the longer you put it off, the less time you have to build a sizable amount of money. You’re also wasting time-related financial opportunities such as compound interest. A good budget will help you set aside money specifically for savings.
You can become debt-free faster with a budget
Paying the monthly minimum on your debts may keep creditors at bay, but you may not be making progress on the actual amount you owe. If you want to pay off your debt faster, you can create a budget with this specific purpose to help you achieve that goal.
Clearly, having a budget is essential if you want to be smarter with your money. The only thing left? Finding the ideal budgeting method that fits your financial goals and lifestyle!
Try These: 8 Practical Budgeting Methods Anyone Can Do
Not sure which type of budget will work for you? Try eight of the most popular budgeting methods below:
This is the type of budget-setting that most people know and do. Traditional budgeting involves subtracting your expenses from your income. Once you’re done, you identify cost categories (e.g., groceries, utilities, etc.) and allow how much you need or want to spend in each one. What’s left is your savings.
This strategy is simple: take off 20% of your income for your savings and spend the rest on your daily needs and wants. Feel free to alter this ratio based on how much you want to budget for each category. Some people change it to 70/30, 60/40, or even 50/50.
This strategy involves dividing your expenses into three categories (i.e., your needs, wants, and savings) and allocating 50%, 30%, and 20% of your pay into each one. Your needs, which include necessities and essential utilities, get 50%. Meanwhile, your wants get 30%, and your savings get 20%.
Cash Only Approach
It’s difficult to take control of your finances if you rely solely on your credit cards for spending. Almost everything is just a swipe away, and the convenience can make it challenging to keep track of every transaction you make.
A great way to fix this is by using cash instead of credit. Set your budget, then withdraw only what you need on your next payday. This will help you monitor how much money your spending and encourage you to save more.
Creating a budget worksheet is easy nowadays, thanks to technology. Simply open a spreadsheet, categorize your expenses, and outline your budget. Establish equations, and you’re done! Just add your figures and watch the system compute everything for you. It’s one of the easiest ways to get your finances in order.
Automated Savings Plan
Do you often forget to save money? Take that concern off your hands by automating your savings. Simply schedule automatic transfers from your salary account to your savings account every payday. If you’re saving for your retirement, open an account specifically for that purpose.
It’s a simple but efficient way to grow your nest egg.
Are you always on your phone? If so, consider installing budget management apps into your phone. They’ll help you keep track of your daily expenses and savings as well as determine the areas that you spend the most money on.
Establish your savings goals to maintain your momentum. Think about the reasons why you’re saving and surround yourself with reminders to help you stay on track. For instance, if you’re saving for a weekend getaway in Hawaii, consider putting up photos of the destination around your home.
What does the best budgeting method look like for you?
The best thing about these budgeting strategies is that you can mix and match until you create a whole new budget strategy that works for you! For instance, use budgeting apps to keep track of your 80/20 budget, and keep your savings objectives somewhere where you can see them all the time.
Feel free to switch from one method to the other— want to save more than the 80/20 allows? Shift to the 50/50 method to reach your saving goals faster.
Whatever strategy you choose, don’t forget the most crucial ingredient – a commitment to your financial goals and the drive to see them through.
Tycoono, LLC and its affiliates do not provide tax, legal, financial or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, financial or accounting advice. You should consult your own tax, legal, financial and accounting advisors before engaging in any transaction. Please refer to our disclaimer for more information.