The internet is brimming with information on the best ways to save money and there are countless budgeting methods available to trial. However, it can be hard deciding which technique suits you best, especially if tracking your income and expenses is not something that comes naturally to you.
The Envelope Method
Also known as cash-only budgeting this is the plastic-free approach to budgeting. Credit and debit cards are not allowed, you are completely reliant on physical money. This method is particularly helpful for people who want to reign in their overspending as, once the cash is gone, that’s it. You simply allocate your money to your separate categories and then withdrawal cash out from your bank account. You then put the cash in envelopes labelled to match your categories.
The 50/30/20 Method
This is a very popular budgeting technique and is very simple to understand as costs are split into three categories:
- You should not be using more than 50% of your take-home pay on life necessities.
- No more than 30% should be spent on lifestyle and entertainment.
- Put 20% of your wage towards paying debts or putting in to savings.
Unlike the envelope method, having three categories is much more streamline and suited to those who want an efficient fix.
Reverse Budgeting
People’s monetary goals differ. Whilst some people are concerned with managing their salary and monthly expenses, others want to save substantially. With reverse budgeting, you build your spending plan around your savings goals.
When planning to reverse budget it can be best to arrange by your short and long term savings goals. Decide how many savings funds you’d like to focus on and figure out how much you can afford to siphon away each month.
Zero-Based Budget
If you want to be 100% in control of your money zero-based budgeting is for you. You will essentially micromanage your finances as you see fit, deciding in advance where your hard-earned pounds will be spent. The main point is to not spend any money unless it has been planned.
One downside of zero-based budgeting is the time it can take to plan and track. Recording every transition can be tedious for those who aren’t used to such an approach.