Many tools and systems can help you budget. For instance, you can use a personal loan repayment calculator or a spreadsheet where you keep track of your monthly expenses.
In this article, we’ll talk about three of the more popular budgeting methods. These time-tested techniques are proven to work, so consider each one to see whether it makes the most sense for your situation.
1. Bare-Bones Budgeting
This is one of the most simplistic budgeting techniques. The name pretty much says it all. You use the money from your paychecks to cover only the most crucial expenses. You save whatever you have left over, creating an emergency fund.
With this strategy, you’re probably budgeting for and paying your rent, grocery bill, utilities, car payments, student loan payments, etc. This is often a solid option for individuals or families who are living as frugally as possible. If you live in a large city and the rent is high, this may be the budgeting option that most appeals to you.
2. Paycheck Budgeting
With paycheck budgeting, you don’t come up with a budget to cover an entire month of spending. Instead, you budget for each pay period, which could be every week or two weeks.
When you use a paycheck budget, you need to keep track of when your essential bills are due each month, and you pay them according to when you get your paychecks. The idea is that you’ll pay for any expenses or bills you incur before the next paycheck comes.
This method is useful for figuring out how much you have in discretionary funds between paychecks. That’s potentially useful information. The only thing that can get a little tricky with this method is that you might have bills that are due at different times of the month.
To make this method more doable for you, you can always contact your service providers to ask them if they can change the due dates for some of your bills.
3. The 60% Plan
The 60% solution for budgeting was pioneered by financial author Richard Jenkins. With this system, you take 60% of your income and dedicate it to your most crucial expenses. You might use that for things like rent, credit card debt, gas, groceries, and so forth.
You put the remaining 40% toward discretionary spending or savings. This option only works if you can pay all your most vital bills using only 60% of your total income. Some individuals and families can manage that, but some can’t.
Choose from Among These Popular Budgeting Methods
Many families or individuals use one of these three methods for their budgeting since they have a proven history of working. The 60% solution is where you put 60% of your net income toward essentials, and you put the remaining 40% toward savings or discretionary spending. It is only an option, though, if you have a job that pays you enough so you can do this.
If you feel like you’re just getting by, you might want to use the bare-bones method. You’re putting all the money you have toward essential expenses, and anything left over you put in savings for a rainy day. With this method, you’re not dedicating any money toward nonessential expenditures.
Paycheck budgeting can be an alternative to monthly budget planning. Instead of looking at your monthly expenses and calculating how to pay all of them based on your entire month’s income, you’re paying each expense that comes up during a given pay period. That could be every week or two weeks, depending on your job’s payment schedule.
Look at each method and think about which one seems the most prudent. You can also try one out and then switch to another one if your first choice doesn’t seem to be working for you.