There are sooo many methods to budget out there. The most important part is that your method works for you. Perhaps you need to break everything into categories to be able to track how you are spending those hard earned dollars. Here are some different methods or techniques that you could look into:

Envelope Method —

This is how I started out with learning to manage my money, especially in college, when I didn’t have much (if any) income. For this technique, you make cash withdrawals for the week or some other specific time frame, say each paycheck. If you are just learning how to budget, financial experts recommend you even label specific envelopes with the cash’s intended purpose. So you would have an envelope for bills (or break them down into specific bills), an envelope for groceries, one for gas, one for entertainment, etc. The cash can be redistributed as needed, but you have to stay within the allotted cash amount for the time frame. Any extra can be saved, or carried over to a future week. This helps bring a physical sense to the amount of money being spent, and many people are more careful about spending cash than they are card. This technique is great especially if you don’t have a lot of electronic bills yet, or if you pay the big bills electronically, and then give yourself a cash “allowance” for your variable expenses.

Dave Ramsey — Snowball + Zero Based Budgeting

This method is super popular, especially for those who are just starting their own budget. It helps you focus on eliminating debt quickly, and understanding where exactly your money is going. Dave recommends throwing as much money at your debt as you can, so you can become debt free and start building real wealth. He recommends paying off your smallest debts first, and then taking that payment, and instead of including it in your regular spending, start increasing payments to the next smallest debt. This helps pay off things more quickly, and cut down on money spent on interest. Thus, the “snowball” nickname. By the time you get to your largest debt remaining, you are able to devote much bigger chunks to the remaining balance. He also recommends using Zero Based Budgeting. This means that at the end of each pay period your account is at 0. You have saved or spent every dollar, so every dollar is accounted for. Dave also has a free app (There is a paid Pro version, but the basic app is free!) called Every Dollar that you can check out here. It has very specific categories, where you can adjust as needed, but keep track of where every dollar goes each month.

50/30/20 Method —

Using this method, you split your finances based on these percentages. Fifty percent of your income goes towards your needs. Thirty percent goes to savings or debt reduction. The remaining twenty percent goes towards your wants. This one is pretty straight forward, but doesn’t have a lot of wiggle room if you stay true to the percentages.

80/20 Method —

This technique is a simplified version of the previous method. Here, 80% of your income goes to expenses, and 20% goes to savings.

A budget sets a plan for how you want your money to be spent. Finding the budgeting method that works best for you will help you become more financially fit. Be sure to check back next week for tips on how to tighten up your budget!

Resources:

• • Heber J. Grant, Conference Report, Apr. 1912

• • Dave Ramsey, Money Makeover

• • How to Use the Cash Envelope Method

• Living Within Our Means, Ensign – January 2008