I know its boring when you have to sit down, and create a budget for yourself. Wondering where all your money goes? How to make make it last for the whole month. Don’t panic we are here to answer all such questions. Each one of you will have different income and expenses, and will need different methods too. What works for you depends on your goals, and how well you follow your budgeting plan.
When it comes to spending money, it is always good to have a plan ready. So, here’s are some methods that will help you plan your budget better. Each method is unique and different in its own way, you need to see which one works for you.
Whether you are creating a budget for the first time or finding a new way to explore, you have come to the right place. National Resource Connect has researched about different budgeting method that will help you.
Balanced money formula
This method is also called the 50-20-30 method, popularized by Elizabeth Warren and Amelia Tyagi. It is a very simple method where you spend 50% of your income on needs, 20% on saving, and 30% on wants.
Your needs consist of important things like food, grocery, transport, shelter, utilities clothing. Your need are not what you think, you might not live without.
Your wants is everything which is not included above. Those are habits which you think you cannot live without. Like vacations, junk food, dinning out, expensive clothing etc ( the list goes on and on). This method does not include any individual categories, so you don’t have to worry much.
50-20-30 method is great for people who want some guidance on balancing saving, investing and repaying debt. Overspending is the common error you could make with this budgeting method.
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Cash only budgeting
This method of budgeting is also called envelope budgeting. You create separate categories here and write it on a envelope. Now you set a monthly spending limit ( according to your income) and put the cash according to the categories in the envelope. For example – If you an envelope for car insurance which costs you $1400 and use it when you want to pay it
This methods protects you from overspending. Here you plan on how much you are going to spend in a month, and make envelopes. This is requires a lot cash in hand, so if you are someone who uses cards might not like it.
If you are someone who would really like to get a control on your spending this is the best method for you.
This is method is called zero-base budgeting, as you do not keep any cash in hand in the end of the month. Zero- based budgeting is when the income you have matches the amount you will spend. The formula of this method is simple income minus expenses equals zero.
However, this does not mean all your money goes, there is some part of your income where you pay for savings account, 401K, or Roth IRA.
You wont have to worry about saving or spending extra. be At the end of the month you will be left with $0. This a little time consuming method, but has the lowest risk for error. You can use this method when you have a little more experience in budgeting.
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The ‘no’ budget
The budget for people who do not like to budget. You only need to pay attention on your bank account that’s all. No budget is the only method where you don’t have to track your expenses.
You do need to keep few things in mind- to know when the recurring bill is hitting your account-to keep an eye on your bank account- to keep cash aside for saving and paying your debts.- to spend the left over without overdrawing
However, it is not always easy to say “no” so make keep this in mind before opting for this method. It gets tough sometimes as you are not tracking any expenses. You need to prioritize saving here as you are not tracking expenses.
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This method is a little different than your regular budgeting. You need to create a list of things you value the most- Now you need to allocate your income based on what you value the most.
So, for example the top value in the list is travelling and the second most valuable thing is buying a car. You put in more money to you first most valuable thing and then the second.
If you feel you have been wasting money on unnecessary things, this is the perfect method to save. You add the value of money to what you like the most. Track money based on your values, you save for what you love doing.
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Don’t give up on budgeting
You might take a little while to see what works for you- But giving up on your financial plan is never a convenient option. You need to patient and find a way to manage your income and expenses well.
We hope the methods mentioned above work for you- We hope you follow and track the budget honestly.
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