Three Budgeting Techniques You Need To Try
Budgeting is an essential part of daily life. In order to manage our finances correctly, we need to adapt to specific budgeting techniques. This way, you will be controlling your money according to a plan which you know, works for you. Many people believe that budgets are useless as they never seem to work. But, in reality, you just have to find one which can adapt to you and your finances. When you eventually find this, you will feel like budgeting is second nature. But, unless you know your finances perfectly, finding your method could take months. Therefore, we have put together three budgeting techniques you need to try.
The Envelope Method
This method is commonly used by people all around the world due to its simplicity. It divides your finances into different categories to give you an organised structure. These categories may including aspects like bills, food, and savings. When you have chosen your categories for spending, you can write all of the titles on individual envelopes. Following this, you will then put the cash into each envelope when specified. This could be every week or every month depending on your budget time frame. You will only spend what is in the envelopes for their titles. This way, you are not overspending and potentially causing financial issues.
Although, getting used to a budget is difficult, especially if you are a new budgeter. Therefore, if you mess up, do not be too hard on yourself. We all make small mistakes with our finances. But, if you constantly make these over and over, we suggest rethinking your decisions.
The 50/30/20 rule is something that can be used nevermind how small or large your income is. It was created by Senator Elizabeth Warren, a financial expert. The idea is to split your finances into three sections. These are already categorised for you, so you just need to input your own finances and the correct numbers.
So, 50% is used for the essentials and the things we need. This includes food, bills, and any other expenses which are important. Following this, the next 30% is used for things which we want. This could be a meal out, a hair cut, a trip to the cinema or even new clothes. Finally, the remaining 20% is to be used for savings.
Each month you should be putting a minimum of 20% of your income away to be saved. This way, you have a safety net to fall back on if necessary. If you do not have any sort of money behind you, you may find yourself with nobody to turn to for help. Not only this but having money saved up for different categories will allow you to build up some sort of savings for the luxuries like holidays or home renovations. But, depending on your income and how much you are saving this could take a while. Here at Simple Personal Loans, we offer personal loans for these luxuries to give you that extra push. For more information click here.
The Traditional Method
The traditional method of budgeting is to consider your overall financial information. By this, we mean all of your expenses and your income. This way, you can get an understanding of what you need to change and how you can change it. When calculating all of your expenses, you should try and keep your amounts as exact as possible. By this, we mean that you should reflect on previous months of spending using help from bank statements or card transactions. It’s very easy to miss out on important expenses, therefore here is some information on the most commonly forgotten aspects. Recording all of your outgoings and aligning them with your income will give you an exact idea of your financial position. This will also allow you to decide what expenses to cut whilst enabling you to create some sort of financial goals.