Many people assume a “budget” is a one-size-fits-all, cut-and-dry regimen, but this is far from the truth. When trying to balance your income and expenses, figuring out what goes where can be difficult. Especially when there are other factors added in like social lives and everyday essentials. Luckily, there are dozens of different budgeting techniques that suit a variety of lifestyles. Here’s a list of the most popular ones:
The 50/30/20 Budget
With this budgeting technique, costs are divided into three main categories that are in chronological order:
50: For all of the essential expenses in your life (groceries, utilities, rent), you should not be using more than 50% of your take-home pay.
20: In this section, you should be saving a minimum of 20% of your paycheck to go towards your savings or to pay back any debt.
30: Lastly, no more than 30% of your take-home pay should be used on lifestyle choices like entertainment, fine dining, and shopping.
With reverse budgeting, there is only one method used: savings goals. In this budgeting technique, instead of setting up categories to analyze your spending, the key is to create aggressive savings goals. This type of budgeting technique is purely focused on one thing, which is hitting savings targets.
The Snowball Budget
This budgeting technique is designed for those who are struggling with debt and want to pay it off through a payment system. To use this technique, you first need to begin calculating the overall amount that you owe for all of your debts. Once you find this amount, decide how much income you will use to make these monthly payments to pay off your debt slowly. After this, begin applying your income towards these debts, starting with the smallest amount of debt, making your way to the largest one.
The Envelope System
This budgeting technique is the simplest out of all the ones listed. For this technique, add up all of your variable and fixed expenses. This includes expenses like utilities, rent, and groceries. After doing this, subtract this from your income and put each expense into its own envelope. Be sure to label each envelope with its total cost and name. Now, each time you receive a paycheck, place the amount in cash for each envelope. This technique helps make sure you have the assets you need for all your expenses as well as a way to save.
Budgeting Tools & Apps
Budgeting tools and apps aren’t technically methods; however, they are worth mentioning. These types of apps and tools can be incredibly helpful in tracking your personal finances, especially on the go. Most budgeting apps can monitor your budgeting goals, and some services even send you a status report at the end of each month.