Inflation got you feeling the squeeze? You’re not alone!
Most people overspend without even realizing it. 🤢 But fear not; budgeting doesn’t have to be a four-letter word.
Forget the word “budget.” Let’s call it “mindful spending,” “your financial roadmap,“ or whatever floats your boat. 🚣♀️ The goal? To know exactly where your hard-earned cash is going.
Pro Tip 1: Keep your fixed expenses (housing, car) under 50% of your income. Your future self will thank you! 🙌
Pro Tip 2: Don’t skip the savings. Invest for your future. You don’t want to be stuck on the paycheck-to-paycheck hamster wheel forever! 🐹
Let’s dive in and discover a budgeting method that not only works for YOU but also empowers you to take control of your finances.
Every Dollar Budget: Before each month, users assign every dollar a job so that their income minus expenses equals zero.
- Pros: You get really in tune with where your money is going. Suitable for beginners or someone who really needs to get their spending under control. Often used with a cash budget and the Every Dollar App. You will see massive improvements in your spending.
- Cons: This method is too labor intensive for some people and may lose interest over time. Some people complain that the Every Dollar app doesn’t track credit cards well (because it is a Dave Ramsey product, and he doesn’t believe in using credit cards).
50/30/20: Budgeting strategy that divides your after-tax income into three categories.
50% goes to needs, 30% goes to wants, 20% goes to savings/investing
- Pros: This provides a pretty good framework for a budget, and it is a happy medium for people who want to watch their money but not obsess over it.
- Cons: The line between want/need can get blurry if you’re not intentional.
Pro tip: I challenge this method to prioritize saving and investing. What tends to happen is people pay for their needs (housing, transportation, food) and their wants (entertainment, dining), and what is left gets invested or saved. I propose the following:
Income – Needs – Savings = What’s Left is for Wants
The No Budget Budget: You take your net monthly income and required expenses into account while keeping spending low. Instead of tracking each dollar with strict budgeting, you intentionally slow your spending for things other than ‘must-pays’ like rent, gas, and food. After paying essential bills, you can spend the rest as you wish, giving you a sense of financial liberation.
- Pros: This works best for people who have enough money coming in that they don’t need to watch every penny and for people who are too busy to keep an eye on it.
- Cons: Without watching your spending, it is very easy for it to balloon in unexpected areas. Even if you’re following a no-budget budget, it is still a good idea to check in once every 1-3 months to make sure your spending is in line with your values.
Pro tip: If you’re doing this, I recommend setting up two checking accounts: one for your fixed monthly expenses and investments/savings and the other for your flexible spending. Have your paycheck deposited into these two different accounts based on the percentage of each. That way, you don’t risk spending money that you need for your monthly bills.
Budgeting Tools:
-Dave Ramsey’s Every Dollar app
-Other apps: Monarch Money (my fav), YNAB, Rocket Money.
-Excel sheet: Set it up as a Google doc to make sharing with a significant other easier.
Remember, the best method is the one that you are going to actually use. So, go ahead and choose the one that makes you feel most confident about your financial decisions!
Need help getting your budget set-up and working FOR you?
Schedule a free consultation and let’s discuss how I can help you!
