When you decide to start budgeting, there are several different methods that you can use. Here are just a few examples to help you get started when it comes time to build a budget:
THE ENVELOPE BUDGET
With this cash based method, every item on your budget has a set amount that you will spend each month. Have an envelope for each of your expenses and fill it with the correct amount of cash. You can then only use that cash for the item listed on the envelope and once it’s empty, you can no longer spend money on that category.
THE ZERO BASED BUDGET
This budget has the goal of learning how to spend your money in a thoughtful way. Which means every cent is accounted for each month. Whether it’s being used to pay bills, going into savings, or used for expenses, you should have zero dollars left over at the end of month.
THE 50/20/30 RULE
With this method, you split your expenses into three different categories and then use the following to pay for them:
- No more than 50% of your net pay (the money you take home after taxes, insurance, etc.) should go toward the essentials on your budget. This includes items such as rent/mortgage, groceries, bills, etc.
- At least 20% of your net pay should be put towards paying off your debt or building up your savings.
- The remaining 30% of your net pay can then be used for extras. This includes items such as going out, gym membership, cable bill, etc.
If you need help tracking a budget, apps are a great alternative to more traditional methods. Some apps can track your spending for you and then help you build a budget. Once you have a budget in place, the app will keep track of how much money you spend in each category. No two apps are the same, so do your research to find what is going to fit your goals the best.