There’s no way around it: Budgeting is hard. No matter how experienced you are with your money, it’s not always easy to use it in the way you’ve imagined — that’s just how life goes.
Still, there are ways to make your budget work better for you, whether or not you’re in an unexpected situation that requires you to pull out your wallet. Play around with the following five budgeting methods to find the one that works best with your spending and savings goals.
1. Zero-Based Budget
This is perhaps the simplest way to budget your funds. Grab a sheet of paper — or open up a fresh Google doc — and draw a line down the middle. On one side, list all the money you have coming in. On the other side, figure out where it’ll go: rent, utilities, groceries, etc. Be sure to include cash you’ll set aside in savings, too. Subtract your expenses from your income until you’ve reached zero. Voila. Budget ready.
2. Proportional Budget
This budgeting style is a bit less specific. Instead of designating exactly how much of your money will go where, you give yourself a loose guideline of how much you’ll save and how much you spend.
For example, you might limit yourself to an 80/20 budget: 80 percent of your money will be spent and 20 percent will go into savings. You could also divide it up more specifically into proportional categories — necessary expenses, fun money, savings, for example — but it’s typically a less exact style than a zero-based budget.
3. Cash-Only Budget
It’s easy to spend money with a card: You don’t physically see your money changing hands, so it’s harder to feel as though you’re spending your hard-earned cash. That’s why some budget-conscious buyers swear by the cash-only plan, wherein they only make purchases with cash so they’re aware of how much they’re spending.
You might not like the idea of taking out your spending budget in cash in one lump sum, so you could find a happy middle ground by using your debit card for expenses until you run out, but that’s up to you — it’s a great way to see what you’re buying and put a stop to frivolous spending.
4. Save-It-First Budget
If you want to bulk up your savings account, this budgeting method is for you. Take a look back at how much money you’ve spent in the past six months on expenses. Average the total and subtract that from your total income — that’s how much you can and will be saving.
Take away the temptation to spend by setting this money into a savings account as soon as you get paid. Use the rest for the things you need and soon, you’ll have a plump savings account that’ll accrue interest and grow even bigger.
5. Line-Item Budget
This is the most specific and tedious type of budget, but it’s worth it because it almost always works. You’ll have to be very aware of what you’re spending — starting a spreadsheet to track your expenses is a great way to start.
Be very clear as to how much money will go where — you can be even more specific with your categories than you would be with the zero-based budget above. Stick to the amount of money you’ve designated in each area, and you’ll be well on your way to conscious, well-advised spending.
Which budgeting method will you try? What has worked for you in the past? Share your stories in the comment section below!