Best Budgeting Options To Manage Your Finances Better

Try one of these budgeting options to take control of your finances

When it comes to managing your finances, finding the right budgeting method can make all the difference. If you don't know how to manage your finances, you will constantly be going round in circles. Here, I have compiled the seven most common and easy-to-follow budgeting methods to help you navigate your way to financial stability.

Each method offers a unique approach to budgeting, from categorizing expenses to prioritizing savings. By understanding the principles behind each method, you can make informed decisions about your finances and take control of your money.

Also check out some of my other topics on finances or even my E-Book that might help you manage your finances better.

The 50/30/20 Budgeting Method

The 50/30/20 budgeting method is a simple yet effective way to manage your finances. By dividing your expenses into needs, savings, and wants, you will ensure that you are allocating your money wisely. 

With 50% of your income going towards needs like housing and food, 30% towards savings for your financial goals, and 20% for wants like entertainment and dining out, you can maintain a balanced budget.

This method is simple and provides clear guidelines on how to distribute your income, making it easier to track your spending and avoid overspending in any category. This is the method I personally use as I find it easiest to manage.

The Envelope Budgeting Method

The envelope budgeting method is a straightforward way to pay bills and save money. First, identify major expense categories that require cash, such as groceries, gas, dining out, entertainment, rent, and more. Next, label several envelopes with each expense category and set a monthly spending cap for them.

Place the designated amount of cash in each envelope, subtracting this money from your income. As you receive your paycheck, allocate the appropriate cash amount to each envelope. For instance, if your entertainment budget is xxx per month, put that amount in the entertainment envelope at the beginning of each month.

By using this method, you are forced to limit your spending to the cash available in each envelope. This strategy encourages you to get creative when funds are running low and prevents overspending. While it may be inconvenient to carry cash, it helps you stick to your budget and reevaluate your spending habits.

Pay Yourself First Budgeting Method

One effective budgeting method is the Pay Yourself First approach. This method prioritizes saving by allocating a portion of your income to savings before covering expenses. By setting up an automatic transfer to your savings account each month, you ensure that saving is a top priority.

With this method, you are less likely to rely on having leftover money at the end of the month to save, as you've already saved a set amount. It aligns with the idea of "paying yourself first" before spending on other expenses.

Zero-Based Budgeting Method

The Zero-Based Budgeting method is all about giving the money you earn a specific job. At the end of each month, your budget should balance to zero, ensuring that it has all been allocated towards a specific purpose, whether it's expenses, savings, investments, or retirement funds. This approach requires careful planning and tracking to make sure that it is utilized effectively.

This method encourages you to be intentional with your money and eliminates any room for unnecessary spending. It forces you to evaluate your expenses thoroughly and allocate your income in a strategic manner.

Value-Based Budgeting Method

The value-based budgeting method takes a unique approach compared to traditional budgeting methods. Instead of focusing solely on numbers and categories, this method encourages you to align your spending with your values and priorities. By identifying what truly brings you happiness and fulfillment, you can allocate your income towards those aspects of your life.

Creating a list of your top values and passions allows you to prioritize your spending based on what matters most to you. If traveling is a significant source of joy for you, you can allocate a portion of your budget specifically for travel expenses. By consciously aligning your spending with your values, you can avoid wasteful purchases and ensure that your money goes towards what truly brings you happiness.

Sub-Savings Accounts Budgeting Method

If you're looking for a budgeting method that offers flexibility and customization, the Sub-Savings Accounts Budgeting Method might be the perfect fit for you. This method involves opening multiple savings accounts and assigning each account a specific goal or purpose, such as a vacation fund or a new home fund.

By naming each account based on your goals and setting up automatic transfers to fund each account regularly, you can easily track your progress towards achieving your financial objectives. For example, if you aim to save xxxx for a trip and have six months to reach that goal, you can divide the total amount by the number of months and set up automatic payments to ensure you stay on track.

This method relies on your discipline and commitment to managing your finances effectively. By separating your savings into different accounts based on specific goals, you can prioritize your spending and work towards achieving each objective systematically. If you enjoy having clear goals and want to build a structured savings plan, the Sub-Savings Accounts Budgeting Method could be an excellent choice for you.

Budgeting on a Low Income Method

When facing a situation where income is irregular or limited, you should always prioritize spending on essential needs such as shelter, utilities, basic food, and transportation. Once these top priorities are covered, the remaining income can be allocated based on a daily spending plan. 

Breaking down your budget in this manner can be disheartening, especially when faced with limited funds, but it provides a clear and straightforward way to track your daily spending. If, for instance, you spend xxx on food in one day, you would need to wait almost four days before making another purchase.

While it may be discouraging, exploring different budgeting methods to find one that suits your circumstances is very important. Giving a chosen method at least a three-month trial period allows for proper evaluation and adjustment if necessary.

Remember, finding the right budgeting method may require some trial and error. Give each method a fair chance, evaluate its effectiveness over a few months, and adjust as needed. With dedication and commitment, you can take control of your finances, build healthy financial habits, and secure your financial future.


Molly | Transatlantic Notes said...

I am finally getting back into some better budgeting routines and it is really helping make life a bit easier and less stressful—which is always welcome. I really appreciated you sharing all the different ways to make the most of a personal budget, it's good to have other ways to do it and remain flexible.