Do you believe in the law of attraction? I do! I’m into all the woo stuff and I believe I’m a better person because of it! However, let me just get it out there, I haven’t yet found the formula to talk about the “b” word without people breaking out in hives!! I’m working on it. And the truth is, the more I talk about budgeting I’m attracting more like minded people and that is a good thing!
Because of that I decided to tell you about all the different budgets there are and what’s my favourite and why. So thank you for sticking around for yet another ramble on organising money and making plans for the spending and savings!
What kind of budgets are there?
- Zero-based budget
- 50/30/20 budget
- Envelope system budget
- Priority-based budget
- Pay yourself first budget
If you’ve been around here for some time you know I’m a fan of the Zero-based Budget ( I combine it with the envelope-system budget I’ll explain that later), the idea is that you assign all your money to different categories. It’s a “hands-on” approach to budgeting and it’s the one that better worked for us when we were getting out of debt. You can read about that here. You have to look at your budget and meet with your partner, if you are in a relationship, I wouldn’t recommend you do it alone! Hence the whine! I gave it the twist and woo I needed to make it work and I swear by it.
Then we have the 50/30/20 Budget, this one is where you allocate your income as follows – 50% to Housing, 30% to Personal and 20% to Savings. Here the idea is that you should not spend more than 80% of your income and save the rest. It’s a good formula if you like formulas but also if you just want to have a chunk of money you can spend and just take the 20% away. For me it doesn’t work but in full disclosure I did not give this method a faire try. I want to know what amount of money I have to spend on groceries and on Starbucks (being on a budget DOES NOT MEAN YOU CAN’T GET STARBUCKS COFFEE!), I know myself and if I only have a vague idea of what money I have I might spend it on coffee and not have money for groceries, but that’s just me, also, I don’t like math!
The Envelope-system Budget, I love it. It’s not practical but neither is owing a lot of money without knowing how you are going to pay it!. True, you have to get actual cash, have an envelope for each category you need or want money in and put the money in the envelope and carry the envelopes around when you go spend the money. This is how I actually did it and I still prefer it today. That said, if that’s what’s keeping you from using this method, come on!, you can just set up 2 checking accounts that do not connect to each other and have one for your bills, on auto draft and another for groceries! You can do that, I don’t see problems I look for solutions always.
Then we have the Priority-based Budget, this budget is where your values are what going to decide where you spend your money, without getting carried away, of course! So you write a list and you may start with giving, if you tithe for example, and then housing and transportation, or paying off debt… it’s about what’s most important to you, keeping in mind that essentials come pretty high on the list… You may find that you have to prioritise some categories and maybe reduce your expenses so that you can get further down your list of things you need to pay. This method may help if you really don’t like math and you feel intimidated. This was probably the first budget I tried, I just wrote a list of things we had to pay, living expenses and wants and I pretty soon figured out it was a math problem for us (we needed to earn more money!!) but it gave me an overall perspective of our financial situation.
Last but not least, there’s the Pay Yourself First Budget, so before you pay or allocate money anywhere in your budget you decide how much money you want to save, take that amount right of the top and then distribute the rest by the different categories you have for the month. This is a budget for someone who is already very comfortable with where they are at financially, or have been budgeting for sometime already and want to be saving more than buying that couch!
As you can see, there’s a budget for all kinds of people and/or where they are at, financially speaking. The one tip I can give you is this: be realistic! When I first started budgeting I would write out the most perfect budget with the money that was coming in. I was so proud f myself, until, well, I couldn’t feed my family of 5 (3 teens) with $300 no matter how much I wished it! No! Not possible! so my budgets ended up not being realistic and that frustrated me and I just wanted to give up because the budgeting wasn’t working. But once I realised the budget wasn’t to blame, I started changing money around the categories and started seeing where I could spend a little less and put that money towards the grocery budget. I do that today! I cannot live without a budget because it is “permission to spend!” like Rachel Cruze says. To this day I love putting money on the envelopes to go shopping and grocery shopping, I don’t need to, but I find I spend less and I’m mindful about where I’m spending when I have real money versus a debit card. And because I had to work on my mindset around money, I struggle sometimes all the time! I know the money is there so I just have to move it around some accounts and it’s fine… but almost immediately I start hyperventilating at the thought that I’ll be back again where I was when I started and that just doesn’t work for me!
That being said, I do change money around the categories and envelopes and when I do have extra money I spend it, I’m a spender at heart!, and knowing that about me helps me to have cash and not cards in my wallet. If there’s no money there’s no money, can’t buy it! If I really want it and decide I’m ok with spending that money, no matter on what it is, I’ll go back with my card, having moved the money around, and I buy it. I know I’m repeating myself but believe me I don’t repeat it enough. You can have the life you want and the hards step is just to start. You pick a budget and you start trying it out, it won’t be perfect, hell, it won’t be any good the first and second time around, lots of shining in between, too, just telling it like it is!. But create the habit of at least looking at your finances. Otherwise the monster will always be there and it doesn’t need to be. I got you!
S – The Sparkling Budgeteer
