Budgets help you maximize your income so you can pay your expenses, achieve your financial goals, and still have money left over for fun! By adopting any of these budgeting methods, you will be able to stay within your spending limit and will progress towards financial independence with ease.
There are many budgeting techniques, but the key is to pick the one that best fits your lifestyle. Your goal should be to suppress your wants as much as possible so you can spend more money on your investments & needs.
1. Traditional Method
Most of us are familiar with the traditional method of budgeting, which involves making a list of your expenses, deciding which categories are more important and how much you are willing to allocate to each category based on your earning power. This method does not require any technical skills or prior knowledge of budgeting; anyone can use it.
2. 50/30/20 Rule
This rule applies to almost everyone, regardless of their income. The 50/30/20 budget rule helps you allocate your finances in a manner that is effective and financially productive. It involves allocating 50% of your income to your needs (transportation, utilities), 30% towards your wants (as travelling, streaming services) 20% to savings. Its main purpose is to teach you to make saving money a priority by making it a key element of your saving plan.
3. 50/40/10 Rule
This is a simple budget plan which also involves you dividing your income into three different ways. Allocating 50% of your to your needs like feeding, medical expenses, etc. 40% however goes towards saving and investment and the remaining 10% into satisfying your wants. This budget method lets you acquire your financial freedom at a faster pace.
4. Envelope Budget System
The envelope budget system is a method that allows you physically portion your income towards different spending categories. Firstly, You prepare envelopes, label them according to your budget categories and then decide the amount of each envelope. This method gives you the freedom to decide how much goes into each envelope and makes you more disciplined in your spending.
5. Budgeting Apps
Budgeting apps make budgeting easier for you. instead of maintaining a book or an excel sheet for your budget try using budgeting apps to cut out all that work. These apps help you track your money, it shows you how much you earn and organizes your expenses into separate categories, making it easier for you to see where and how much you spend.
If you always wonder where your money goes, it means you either don’t have a budget. Using any of these budgeting methods keeps you aware of where your money goes so it can allow you to make appropriate changes when needed.
“Budgeting is not just for people who do not have enough money. It is for everyone who wants to ensure that their money is enough.”
― Rosette Mugidde Wamambe