By now, you’ve probably heard someone wax poetic about the importance of managing your money and taking control of your finances. But despite the fact that it’s an essential life skill, budgeting isn’t something we’re taught in school. And unfortunately, most of us are paying for that now.
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That said, although a budget can help you mitigate monthly money struggles and live comfortably, finding the right one for you is often easier said than done. After all, there’s a plethora to choose from, and it can be discouraging when they don’t fit into your lifestyle and needs.
If you’re sick of ditching the budgeting apps after just a few days or want to finally take control of your finances, you’ve come to the right place. With one of these budgeting strategies, you can manage your money, stay on track, and reach your financial goals. Keep reading to learn everything you need to know about eight insanely effective and simple budgeting strategies.
8 Budgeting Strategies
1. 50/30/20 Budget
The 50/30/20 budget splits your monthly after-tax income into three categories: 50% for needs, 30% for wants, and 20% for financial goals like savings, investments, and debt payments. This budgeting method is great for those who want to find out where their money goes or get a hold of their spending without feeling restricted. It can also be tweaked as needed; if you need to focus on paying off debt and building a savings, you can make the financial goals category 30% and the wants category 20%.
To get started, determine your monthly after-tax income, then use this free NerdWallet calculator to find out what your 50/30/20 budget should be. Once you have those numbers, it’s up to you to hold yourself accountable. Admittedly, this can be challenging for those who have difficulty controlling their spending, have complex financial situations, live in a high-cost area, or are living paycheck to paycheck. However, tracking your expenses with a budgeting template or app like Mint can make things easier.
2. Pay-Yourself-First Budget
Pay-yourself-first budgeting is exactly what it sounds like—you deposit money into a savings account first and foremost. To build this budget, write out a list of your savings goals; building an emergency fund and retirement savings, saving for a down payment on a house, and paying off student loans or credit card debt are some common examples. Then, use your credit card and bank statements to find the total amount of your monthly expenses and subtract that number from your monthly after-tax income. From there, take the amount you have left over and allocate it towards your goals as you wish.
When done right, this budgeting system can help you fast-track your short- and long-term goals and avoid racking up debt and overdraft fees. However, this method will be easier for those who have extra funds; when you don’t have a lot of wiggle room, it can be harder to save. Just try to remember that saving a little is better than saving nothing at all. And setting up automatic transfers into your accounts and investment portfolios, along with automatic 401(k) withdrawals from your employer, can save you a lot of time and energy.
3. The Envelope System
It’s hard to understand how much you’re spending when you don’t see or feel money leaving your hands. If you’re a notorious overspender, consider envelope budgeting. This cash-based approach divides your money into separate spending categories by creating cash envelopes with a set amount. You then use each envelope accordingly, and once the money runs out, you’re done until next month. It’s a great way to develop self-control and become more conscious of your spending.
That said, while this system can prevent credit card debt and overdraft fees, the biggest downside is that you can miss out on the chance to improve your credit score or utilize credit card perks, like cash back, travel rewards, etc. So if you’d like to take advantage of your credit cards, consider using Goodbudget. It’s one of the best budget apps and uses a modern approach to the envelope system.
4. Zero-Based Budgeting
If you love spreadsheets and numbers, zero-based budgeting (ZBB) might be the move for you. This method encourages you to allocate every penny of your monthly income into needs, wants, and financial goals. The primary difference between ZBB and other budgeting approaches is that your balance should be $0 at the end of the month—a sign you’ve paid for necessities, contributed to financial goals, and allowed yourself spending room without incurring more debt.
ZBB is great for improving financial awareness and when and how money’s flowing in and out of your life. But make no mistake: It’s time-consuming and tedious. It can be challenging if your income varies or unexpected expenses pop up because you’ll have to move the numbers around accordingly. If you’d like to try this method, print out this free ZBB template or sign up for the best zero-based budgeting app, YNAB.
5. Minimalist Approach
A minimalist approach to finances means spending intentionally and living below your means. Instead of focusing on where to spend your money, you put it into the things that matter most to you and help you build a rich life monetarily and sentimentally. For this reason, this approach tends to work best for people who already have a grip on their spending and know what their core values are.
To get clear on what your core values are, write a list of what means the most to you (think: family, freedom, and so on). This will show you where you should be spending your extra money. For example, if family’s important to you, you might focus on traveling to see them more often. Likewise, take a look at your expenses and see where you can cut back and save. Minimalists aren’t drowned by excess anywhere in their life, and that includes finances, too.
6. No-Budget Budget
Constantly stressing about what you should be spending and saving can be exhausting. Enter: the no-budget budget. Unlike a traditional budgeting method, this approach has you pay all your expenses at the beginning of the month. Then, you put a percentage of what’s left into savings and debt payments and use what’s left of that as you wish.
The no-budget budget will work well for someone who doesn’t like ultra-restrictive budgets. It’s also ideal for those who want to focus on tightening up their finances briefly in order to reach their goals. To master this, try automating your bills and a percentage of your paycheck into savings and retirement on the first of the month; you’ll then be left with spending money to use at your discretion.
7. Kakeibo Method
Kakeibo is a Japanese budgeting method that uses a journal for budget management. In it, you track your income and expenses, set and work towards financial goals, and improve your relationship with money. Similar to other budgeting methods, Kakeibo allocates a percentage of your paycheck into four categories: needs, wants, culture (like streaming services), and unexpected expenses (AKA emergency fund).
Furthermore, at the end of every month, sit down and journal your answers to these four prompts to refresh your financial goals and ways to improve.
Prompts to answer in your Kakeibo journal:
- How much money do you have?
- How much money would you like to save?
- How much money are you spending?
- How can you improve?
All in all, everyone can benefit from this mindful approach to money management. No matter how financially secure you are, there’s always room for improvement.
8. Automated Spending
Contrary to popular opinion, budgeting doesn’t mean kissing shopping goodbye. Similar to automated savings, automated spending deposits the “spending” portion of your paycheck into its own checking account every month. You can then use the debit card for that account or withdraw cash from it to use however your heart desires. Just be sure you have overdraft protection or a stop system that blocks you from over-drafting (like rejecting your card, etc.) in place.
This method will probably be most beneficial for the girl who loves to shop. It’ll create the necessary protections to stop them from draining their bank account while simultaneously giving them the freedom to spend. Likewise, they’ll also become more aware of when they’re spending money, which will help them save more.