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Personal Budgeting Methods: Finding Which Works For You

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If you’ve ever looked up money advice, you’ve likely found a slew of contradicting ideas about how to manage your finances. Advisors can have differing opinions about how to do things, so you may be left wondering which one is right.

In truth, there is no absolute way to go about money management. Everyone has their own unique lifestyle, spending habits, and personal preferences. This means everyone will have a different budgeting style that best suits their needs.

Luckily, as long as you’re aware of how you’re spending your money, you’ll be on the right track. To help you develop a sense of your spending habits, we’ve gathered a list of the most popular money tracking techniques. Explore these personal budgeting methods to decide which one is best for you. 

personal budgeting methods

Envelope Budget

Envelope budgeting is an amazing option if you have a hard time disciplining yourself or want a more concrete handle on your money management. The envelope budget requires you to use cash for all of your daily transactions, so this hands-on method will force you to think about your purchases more than you would when swiping your credit card. Here’s the process for using envelope budgeting:

  • Create a budget. Categorize your spending by monthly bills, food, household items, entertainment, savings, etc.
  • Make envelopes. Create a labeled envelope for each category and put the correct budgeted amount of cash in each. 
  • Pay cash. Keep your envelopes in your purse or wallet and pay cash whenever you are out. When the cash from that envelope is gone, stop spending.

50/30/20 Budget

The 50/30/20 budget is a popular method that allows some flexibility, while still enabling you to put a significant portion of your money toward savings and “fun money.” This is a great budget plan because it works for any income level. Because it is based on percentages, you can easily adapt it when you get a raise or need to cut spending. And if you want to tweak the percentages a little, that’s okay too. Here’s how it works:

  • Put 50% of your income toward essentials like housing, food, and transportation.
  • Allot 30% of your income for other expenses like eating out, going on trips, or other non-essentials. This is where you have some freedom to choose your priorities!
  • Save 20% of your income for an emergency fund or other financial goals.

Zero-Sum Budget

Many people set up a strict budgeting plan, only to find themselves borrowing from other budget categories with the intention to make it up the next month. But it becomes hard to keep track of splurges this way, and your spending quickly spirals out of control. The zero-sum budget can take care of this problem by allocating every dollar to a certain job. Here’s how to put this method into action:

  • Look at your monthly income and make sure every dollar is put into a certain category.
  • Don’t leave any money left over in your checking account at the end of the month, because then you’re likely to spend it.
  • If you do have money left over, you need to put it somewhere before you mindlessly spend it. We suggest putting that money towards a savings or investment account or using it to pay off a debt. Another option would be to make a charitable donation with it.

The Right Budget For You

After reading through this list, you may have identified which budgeting style best fits your needs. Now that you’re familiar with the basics, you can build on that and create the perfect budget for yourself. Don’t be afraid to customize a budget or even create your own budget plan. As long as you stick with your technique and stay in control of your money, then you can consider your budgeting method a success.

And if you’re looking for a way to pay for unexpected expenses that don’t fit into your current budget plan, personal loans may be the right option for you. Contact Power Finance Texas to learn more about our loans and services.