5 Budgeting Methods to Help to Live Best Life

According to a 2020 National Foundation for Credit Counseling survey, only 47% of Americans have the savvy to use budgeting methods to keep a close eye on their spending. Budgeting is considered to be the cornerstone of financial planning and can aid you in your quest to reach your financial targets with ease. For That purpose we have crafted this awesome article about 5 Budgeting methods to help you in creating budget.

By developing a budget, you are provided with an insight into where your hard-earned money is being spent, giving you a sense of control over the process—not having a clear plan for your cash flow can result in you making spending decisions that work against your best interests without even realizing it.

What are 5 Budgeting Methods you can adopt to keep your finances in check?

Whether you prefer the old-fashioned pen-and-paper method or modern technology, many budgeting techniques can help you track your expenses effectively.

5 Budgeting Methods Everyone Should Know About

Before opting for a new budgeting approach, it’s essential to grasp your spending patterns. This will give you a clear picture of which areas need improvement and how to go about it. To get started, PNC Bank’s COO, Megan Luke, suggests keeping track of all your expenses for a couple of months.

Collect receipts for every penny you spend and categorize them into piles, such as food, gas, entertainment, etc. This will give you a comprehensive understanding of your current spending habits and opportunities to make adjustments and save.

Alternatively, you can use your online banking or credit card account to view your transactions and categorize them similarly.

With an understanding of your spending habits, you can now explore the 5 different budgeting methods and determine which works best for you. No one method is universally suitable, so it’s important to compare the benefits and drawbacks of each to determine which approach is right for you. Remember, the key is to find a method that helps you achieve your financial goals and fits your lifestyle.

1. Zero-based budget – In this method, you start with zero and allocate every dollar of your income to a specific expense or savings goal. The advantage of this method is that it forces you to prioritize your spending and ensures that every dollar is accounted for. The drawback is that it can be time-consuming to create and may not allow for unexpected expenses.
2. Total budget – This method involves taking last year’s budget and making small adjustments. The advantage of this method is that it saves time and is less stressful because you don’t have to start from scratch. The drawback is that it may not be as effective in dealing with changes in your financial situation, such as an increase in expenses or a decrease in income.
3. Activity-based budget – This method involves creating a budget based on the activities you want to do, such as travel or dining out. The advantage of this method is that it allows you to allocate money toward the things that bring you joy and fulfillment. The drawback is that it may not prioritize necessities such as bills and savings goals.
4. Value proposition budget – This method involves creating a budget based on your values and priorities. The advantage of this method is that it aligns your spending with your values and helps you prioritize it. The drawback is that it may not account for unexpected expenses or changes in your financial situation.
5. Flexible budget – This method involves creating a budget that allows for flexibility and adjusts based on your income and expenses. The advantage of this method is that it allows for unexpected expenses and changes in your financial situation. The drawback is that it may be less effective in ensuring that your spending aligns with your values and goals.

Why you shouldn’t give up on your budgeting method

There are several reasons why you shouldn’t give up on your budgeting method:

1. Aids in Financial Goals – A budgeting method helps you track your expenses, prioritize your spending, and allocate your income towards your financial goals. Without a budget, it can be challenging to reach your financial objectives.
2. Increases Awareness of Spending Habits – Budgeting provides a clear picture of your spending habits, enabling you to identify areas where you can reduce or eliminate expenses. This increased awareness can help you make informed decisions about your finances and achieve financial stability.
3. Provides Financial Control – A budget gives you control over your finances, allowing you to make conscious decisions about where you spend your money and ensuring that you live within your means.
4. Increases Savings – By allocating your income towards your expenses and savings goals, a budget can help you increase your savings and achieve financial independence.
5. Helps with Unexpected Expenses – A budget provides a cushion for unexpected expenses, allowing you to prepare for emergencies and unexpected financial events.

Conclusion

In conclusion, budgeting is crucial to managing your finances and achieving your financial goals. It helps you keep track of your spending habits, provides financial control, increases savings, and prepares you for unexpected expenses.

By utilizing one of the 5 budgeting methods discussed, you can find the best approach for you and take control of your finances. It may take time to develop a budget that fits your lifestyle, but the benefits of having a clear plan for your cash flow are immeasurable.

Don’t give up on budgeting, as it is an essential tool for financial stability and success.