Budgeting is a surefire way to keep your finances under control both in the short and long term. Being aware of every aspect of your budget will help you spend less, as well as set and achieve your financial goals. Luckily, there are plenty of budgeting methods to suit every person. So, without further ado, let’s talk about the most popular approaches to budgeting.
Budgeting Apps
Before we proceed to the classic budgeting methods that have proven to be effective over time, let’s take a look at some budgeting apps that are steadily gaining popularity. Here are some of the apps with top reviews:
• Mint
• PocketGuard
• Personal Capital
• Zeta
• Simplifi by Quicken
Using apps for personal finance planning is extremely convenient as they enable you to have all the budgeting info you need at hand wherever you go.
Method 50/20/30
This method divides all of your spendings into three broad categories. Every time you receive money, it should be divided as follows:
• 50% – compulsory expenses. This includes utilities, rent, transportation costs, health maintenance, food. These expenses are approximately the same every month.
• 30% – irregular expenses. This includes entertainment, spending on hobbies, travel, etc.
• 20% – savings or repayment of existing loans.
If the obligatory expenses make up more than half of the income, then it is worth reducing the irregular ones. If less than half – then add the remaining money to savings.
The Classic Envelope Method
The simplest budgeting approach is the envelope method, which is used all over the world. It has evolved over time, and new ones have appeared on its basis. The idea is that you distribute all your income into envelopes, that is, the categories of goods and services on which you plan to spend money.
Then, every time you need to make a purchase, you take money from the corresponding envelope. If the category is important, such as food or health, then in critical situations, money can be taken from other envelopes. However, if it is entertainment or eating out, then it is not worth spending more than there is in the envelope. It helps you save money and meet your financial goals. At the end of the month, you can analyze your progress and change the volume of envelopes if it turns out to be unrealistic on the first try.
Priority-Based Budgeting
This budgeting method is commonly implemented by governments but works miracles for personal finances as well. Firstly, you have to list all the categories of your expenses and rank them from most to least important. Taking your budget as 100%, you should allocate a certain percentage to every expense category by priority. Thus, the mandatory expenses, such as bills, food, rent, transport, etc., should come first. Closing the list will be entertainment categories alongside non-essential shopping.
What If the Budget Was Counted Wrong?
Everyone makes mistakes, especially when it comes to financial planning. If you miscalculated your budget, you could always contact a reliable payday loans company, such as Payday Depot, to help you out while you are waiting for the upcoming salary.
