You need a budget! It’s one of the first pieces of financial advice many of us hear as we approach adulthood. Budgeting isn’t a one-size-fits-all exercise, though. Fortunately, there are several systems are out there to help you get started on or refine your budgeting journey! Here are just a few:
The Line-Item Budget.
This is the most basic budgeting method. You list out all of your expenses, both necessary and discretionary. This includes housing costs, transportation, insurance, utilities, food, fuel, clothing, entertainment, and savings. This approach may work best for those who need to get spending issues under control.
The 50/30/20 Budget.
50/30/20 splits your budget into three big categories: Necessities (50%), Wants (30%), and Savings & Debt (20%). This method is great for getting a high-level view of your spending habits. It’s also great for giving you a benchmark. Spent too much on necessities last month? Look for opportunities to cut back to get back to the 50% level.
The 60% Budget.
This method is like the 50/30/20 method but zeroes in on keeping your necessary spending at the 60% threshold or lower. Debt payments, retirement savings, emergency funds, and fun money make up the remaining 40%. This method can work best if you suspect your household’s spending habits could be a problem.
The “Pay Yourself First” Budget.
You got paid. Now pay yourself! This method is great for those who have a hard time building their savings/emergency funds. Start by setting aside the money you wish to save each month. Then, spend the rest of your money as needed. The catch is that you cannot dip into your savings to cover any spending that exceeds what you budgeted for.
You’ve likely tried one or two of these budgeting strategies. If they didn’t work for you, it may be that they weren’t the right fit for the way you work. That’s okay! Everyone is different. The important thing is that you find the right tools and strategies that help you reach what you want to achieve. If one didn’t work in the past, try another! Most of all, don’t feel frustrated, budgets are always a work in progress. We’re here to help if you need us, just call!