Four Budgeting Methods To Help You Reach Your Personal Finance Goals

Have you ever caught yourself thinking, “A budget simply doesn’t work for me”?  Most people have a difficult time sticking to a budget, so you’re not alone in your struggles.  However, you may not have realized that there are many budgeting methods that can fit different needs. In this article, we share examples of budgets you can start trying today. Choose the one that works best for your needs and lifestyle and then adapt it accordingly.Reach Your Personal Finance Goals

Reverse Budgeting

One budgeting method is called “reverse budgeting”.  This method focuses on savings goals rather than spending restrictions. Before you pay any of your fixed expenses or give yourself “play” money, you focus on providing for your savings goals.  These savings goals can be for retirement, paying off debt, building an emergency fund etc.  After you pay yourself,  you work with what is leftover.   The great thing about this type of budgeting system is that you have more freedom with your disposable income.  You don’t have to watch where your dollars are going since you have taken care of your fixed expenses. 

This type of budgeting works best for people who have a hard time saving or find it difficult to budget for every expense.

The Envelope System

If you’re just starting out on your financial journey and need something a little more “hands on” than an Excel spreadsheet, you may want to consider the envelope system. This is an all cash budgeting method.  Once you know how much money you can spend in each category of your expenses (i.e. car, grocery, entertainment), you make an envelope for each one of those categories. Then, put a set amount of money to use in each envelope.  

As an example, when you go grocery shopping, you are able to use whatever cash you have put aside in your “grocery” envelope.  If you spend all the money, you have nothing left for the month unless you dip into other envelopes.  Just beware of doing this.  It can cause a snowball effect and you can run out of cash before the end of the month.

This type of budget works well for someone who feels comfortable working with cash.  If you think you may end up spending the cash in places you shouldn’t, this system may not be best for you.  The last thing you want to do is head down a path towards debt and credit repair.

Budgeting Apps

If you hate Excel spreadsheets but still appreciate technology, then you may want to try using a budgeting app like Mint or You Need a Budget. These apps automate the budgeting process by telling you how much you’re spending in each category of your expenses and then letting you know when you’re getting close to exceeding your budget. They also keep all your personal financial information in one place, so you can feel organized without the clutter of paperwork.

The 50/30/20 Rule

More general than some of the other budgeting methods, this rule offers a simple framework that dictates how you should allocate your budget. While 50% of your take-home pay should go towards fixed expenses and necessities, 30% of your your take-home pay can be spent on wants like dining out or a new outfit.  Finally, 20% should be put into retirement accounts, savings, and emergency funds.

This type of budgeting works well for people who don’t want to deal with keeping track of individual expense categories.  With just three to keep track of, you can focus easier on your finances.

 

Author Bio

Author BioDenise Amara is a Senior Credit Strategist and Editor at Creditmarvel.com, the ultimate authority on credit repair. Denise has over 8 years experience writing comprehensive guides that help consumers better their habits as it relates to personal finance and credit.