![]() ![]() Your checking account balance will never hit zero, plus you’ll have a built-in cushion in case you need it. Once you reach that point, you pay the current month’s expenses using last month’s income. YNAB helps you get one month ahead on bills. Zero-based budgeting, or giving every dollar a job, is the principle behind the popular budgeting software You Need a Budget (YNAB for short). There’s no panic or scrambling to come up with the money for these expenditures. That way, when the bill comes, you just pay it since you have the money. You also set aside money every month for irregular budget items and bills you don’t pay monthly, like car registration fees or annual expenses that might be due in the upcoming months. People who follow this type of budget refer to it as “giving every dollar a job.” That means you put every dollar you make toward a predetermined expense. It means you need to account for every dollar and treat your savings like any other expense category. That doesn’t mean you spend everything you earn or blow any leftover dollars on toys. If you follow a zero-based budget, your budget will equal zero at the end of every month. Just keep track of each expense by category and don’t exceed your spending targets. Pay for things electronically or with your debit card as you normally would. You can use a spreadsheet or a budgeting app instead of actual envelopes. You probably don’t hand over an envelope of money when you pay your electric bill. Since we don’t pay all our bills in cash these days, an envelope budget might sound impractical or outdated. ![]() Using cash envelopes prevents going a bit over budget in any budget category. For example, if you have an envelope for clothing expenses, you’re done spending money on clothes for the month as soon as the envelope is empty. Once your envelopes are created, you can only spend what’s in the envelope for each expense category. Place the amount of cash you allocated to each category into the appropriate envelope. ![]() It’s not the most flexible budgeting method, but it can help you get your finances under control.Ĭreate an envelope for each of your monthly expenses (rent or mortgage payments, food, gas money, etc.), then figure out how much money you need to set aside for each expense category. The envelope budgeting system is a straightforward way to pay bills and cut down on unnecessary spending. If you’re new to budgeting your money, it’s a good way to create your first budget, but you might long for something easier and less time-consuming. However, it takes a lot of time and can lead to budget burnout. You’ll probably find plenty of things you can stop spending money on. That’s ideal if you need to eliminate unnecessary expenses or cut down your spending. With detailed expense tracking, you’ll see at a glance where all your money goes. ![]() The traditional budget tracks every single expense and all your income to the penny. Since your income is the basis for your monthly budget, it’s better to make conservative projections. If your income varies from month to month, calculate your average monthly income for the past year. When people think of budgeting or budget methods, this is usually what they have in mind.įor variable monthly expenses like utilities or car maintenance that fluctuate, go through your past six to twelve months of bills and come up with an average. You’ll set goals based on how much you want to spend in each expense category. The traditional or line-item budget is one where you record all your income and monthly expenses, then decide where to reduce your spending. Here are ten popular budget methods you can choose from when creating your first budget: 1. You can reach your financial goals using any of the budgeting strategies below. While there is no perfect budget system that works for everyone, the good news is there doesn’t have to be. With So Many Different Budget Methods, How Do I Pick One?.The Reverse Budget (Paying Yourself First) Several budgeting techniques are available to help you track your income, manage your expenses, and reach your financial goals. You’ll avoid overspending, and you’ll be able to put more money away toward longer-term goals like education, homeownership, and retirement.īut if you’ve never budgeted before, how do you get started? Unfortunately, the answer is not so simple. " xlink:href="# flipboard "> Share on Flip it Budgeting Methods for Personal FinanceĮveryone can benefit from having a budget.Įven if you don’t have any money problems, setting and sticking to a budget will help you reach your financial goals faster. Share on Twitter Share on Facebook Share on Pinterest Share on WhatsApp ![]()
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