4 Budget Strategies You Can Choose From
Budgeting is the core of good money management, and there are many ways to do it! Here are four budget strategies that you can choose from, or make a strategy of your own that will work for you the best.
Why budget in the first place
As mentioned earlier budgeting is the core of budget money management. You need to know where your money is going in order to properly manage it!
No matter your income, budget is necessary in order to reach financial goals.
In this post you can find 5 reasons to have a budget.
Budget strategies
Budgeting is for everyone, but not everyone needs to budget the same way. You can manage your budget in whatever way works for you and helps you reach your financial goals.
What is important about budgeting as that it should be written down.
It doesn’t matter how, it can be on a paper, in a budget planner, budget app, in the notes of your phone/computer, an excel sheet, a Google docs, whatever works for you!
Here’s 4 budget strategies you can choose from, or take from each what you find useful and make your own strategy!
Proportional budgeting
Proportional budgeting is a strategy where you split your income based on percentages to go towards different things.
A popular way to split is 50% towards needs, 30% towards wants and 20% towards savings and debt.
This of course depends on your mandatory living expenses (the needs) because for many this figure might take out a bigger portion of their income.
But, this strategy is very flexible and you can make up your proportions as they suit you.
The Barefoot Investor method uses this type of budgeting.
Zero-based budgeting
In zero-based budgeting the idea is that every single dollar gets given a purpose.
This requires you to have a very clear idea on how much you need for expenses. On top of expenses and debts, you also clearly budget for savings and the things you want (shopping, eating out, whatever makes you happy!).
What’s really distinctive about zero-based budget is that you won’t carry a balance into the next pay period. All money has been allocated to their decided purposes.
Value based budgeting
Value based budgeting approaches the way you manage your money from your values and life goals perspective.
You choose what you spend on and what life choices you make based on what you truly value in life.
If you value traveling, maybe you will choose to live somewhere cheaper so you can put more money towards it.
Or, if you want to retire early you will put as much money aside for investing as you can save on other things.
Automatic budgeting
Automatic budgeting is when you set up automatic payments so you can set your budget and most of the time, not think about it.
This of course only works with bills that are fairly regular and that you can predict the amounts.
Automatic budgeting often works best when it comes to for example savings and investing goals. If you set up automatic payments to go to your savings account and investing account, it might really help you build up those goals.
That way you also can’t accidentally use the allocated money towards anything else.
Having multiple accounts might work well with automatic payments and you can automatically allocate money to bills account, grocery account, shopping, or what ever kind of accounts work within your budget to make sure that your money management is as easy as possible for you!
What budget strategies I use
I mainly use zero-based strategy with quite a few different accounts to manage different expenses. I also have some automatic payments going to savings and one weekly bill (our daycare fees).
I could have more automatic payments if I wanted to do, but I feel more control when I transfer money weekly according to my budget. (And I enjoy it haha!!)
What kind of budget strategy would work for you?
