Choosing The Right Budgeting Method for Your Lifestyle

Everyone wants to have a good relationship with money. However, being in control and managing your money consistently over time can be a challenge. You will need a budgeting method that fits your income and helps to keep expenses at bay. With so many budgeting methods, how do you choose the right one for your lifestyle?

The choice of a personal budgeting plan will depend on your financial goals. Are you looking to pay down a pending debt? Or perhaps, you want to kick poor spending habits? It could also be that you want to make a significant purchase or focus on saving more. Depending on this top priority, you can come up with a budgeting plan that is perfect for your lifestyle:

Before deciding how you will be spending your money, you need to evaluate whether your current financial status will work for or against your future goals. Identify the main strengths and weaknesses, and use this time to outline any adjustments you need to improve your finances.

With your financial status in mind, list down what you need to do to reach your goals. Think about your commitment levels and how they will help in the achievement of your budget. At this point, you may decide how you will be tracking your purchases depending on your income. Some budget items may need weekly check-ins while others can do with monthly.

After laying down your money management plan, consider whether you want to track the finances manually or automatically. The manual approach means recording everything with a pen and paper or in a spreadsheet, while the digital approach involves automating your savings and spending goals with an app or program.

Once you have everything in place on how you will be recording your income and expenses, narrow down to a budget method that will fit your lifestyle. There are several approaches, and you can choose one that you can use without struggling financially.

The flexibility and usability of different budgeting methods make it easier to choose something that first perfectly with your lifestyle. Do you want to curb your spending or save as much as you can, there’s an option for that:

The envelope method is suitable for those who want to curb their spending. If you have a fixed income but are not excited to track every spending, then this method will work well with your lifestyle. It involves setting spending limits by categories to keep your spending in check.

With the envelop method, you set limits for each category, which may include groceries, clothing, house bills, and even entertainment. Then you a lot an amount to each envelope that you will use till your next paycheck. The envelopes could be physical or digital, but once depleted, you will not spend on that category until your next paycheck.

Another similar approach is assigning a job for every dollar that you set aside in your budget. In this approach, you set aside a month for each monthly task of expenses. This means setting part of your paycheck to groceries, and another to bills, debt, vacation fund, and more. Once your balance reaches zero, you stop and wait for the next paycheck. The method is more effective when you want to develop an intentional spending plan.

This popular method is ideal for people with debt, such as student loans or mortgages. It involves taking care of your wants and needs first while putting aside part of your paycheck to pay off debt. The easiest way it split your monthly income across these three components. 50% will go to your monthly expenses (needs), while 30% for wants like entertainment. The remaining 20% is strictly set aside for paying off debt or savings.

Although only common among entrepreneurs and business owners, this type of reverse budget allows you to compensate yourself for the information. You start by contributing to your investments and savings before making any payments for bills or purchases. This means that you can accurately decide the amount you want to set aside. When the income is high, you can set aside more money and vice versa.

While each of the budgeting options is feasible, the choice will depend on how you want to manage your money. Deciding whether you want to prioritize investment or your focus is on paying off debt, you can choose a method that will align perfectly with your lifestyle.