Knowing how to manage your money is complicated. You want to make the most intelligent decisions for your money. Thankfully, we know about budgeting systems that’ll help you keep all your money–and we mean all of it. To learn more about budgeting and how it can help you manage your finances effectively, read on.
Table of Contents
1. Use Zero-Based Budgeting
The idea behind this method is that your total income subtracted from your spending should equate to zero by the end of each month, with all money being used effectively. With this established, you can meet your money goals with less hassle. For example, if you have an extra $200 leftover, instead of letting it sit, you can set some of that money aside to pay back debt, save for a new vehicle, and so on.
You should have $0 left after subtracting these categories and costs from your income. The main difference between zero-based budgeting and regular budgeting is that it provides a place for your remaining money to go instead of leaving it to your checking account for later use. The idea is that every dollar you make is going towards a specific financial purchase.
2. Consider Flexible Budgeting
If you’re not ready to begin applying something tedious like the zero-based budgeting system, you can consider other budgeting methods that may be more applicable to your situation. Another commonly used budgeting system is the 50/30/20 budget, whereby your budget is divided by those percentages to fit your financial needs and wants.
You classify each item you purchase into one of these three categories and respond accordingly. This way, you have ample room to manage your money because the system is easy to personalize without set categories.
You can adjust your needs when events like the holidays are coming up to allocate more money for gifts or when a crisis strikes and you need to readjust your budget for emergencies.
3. Use The Cash Envelope System
Another way to save money is to withdraw the exact amount of cash you need for each category, with one envelope labeled with that name and the money for it. If you do this to last you a month, you are limited to the envelopes’ cash for each intended purpose. For example, if you set aside $400 for groceries, you’re more inclined to spend less each time you go to the store because you know that $400 should last you for the month.
If you like a hands-on approach or are someone who needs help avoiding impulsive purchasing, this is a smart method since you get adjusted to relying on a budget and practicing smart saving strategies.
4. Set Your Budget Around A Goal
If you are more motivated by achieving goals than meeting numbers, create a long-term goal that requires you to optimize your budgeting. Say you want to save for a new home. In this case, your budget should be created around this specific goal. A financial planner can help you achieve this.
If you save money around this goal, you use your goal as the orbit around which the rest of your money revolves. You’ll feel more motivated to stick to the allotted amounts for each part of your budget in order to achieve your goal in the end.
The Bottom Line
Staying on top of your finances is about applying suitable budgeting systems to keep you on your toes. The best financial system out there is the one that works for you. Start with the personalized budgeting method and work your way up to complex processes to make the most of your money.
