2 Budgeting Methods To Transform Your Financial Life


When it comes to money, there are two kinds of people; the spender and the saver. If one word you hate to hear is “budget” then you are most likely the spender.

This is because to the spender, budgeting implies “not having fun” with your money, thereby eroding the spender’s sense of entitlement to his/her money. However, that is a misconception about budgets. Budgeting helps you to spend freely while also saving.

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First of all, you need to know your expenses. Think of all (both big and little) expenses from the previous months and categorise them with labels like ‘Transportation’, ‘bills’, and so on. This helps you know where your money is going and makes the following tips easier to follow.

The 50, 30, 20 Method

2 Budgeting Methods To Transform Your Financial Life

This method is a proportional type of budget.

A good rule of the thumb is to save 20%, use 30% on wants and 50% on needs, debts, bills, and household expenses. The 50,30,20 budgeting method is only a guideline. The ratio could be tailored to suit your responsibilities, income and expenses. For example, a person with no debts, few responsibilities could opt to save 50% while allocating the remaining 50% to other personalised categories.

However, if you are not sure how to begin, the 50:30:20 ratio is a perfect way to start.

The Envelope Method

2 Budgeting Methods To Transform Your Financial Life

The envelope method is another proportional method that is practical. In this case, you label your different expenses and decide the amount which will be allocated to each category.

The purpose of this budgeting method is to cut back on overspending on a particular category. Allocating different amounts to different envelopes/categories ensures that you monitor your spending on a particular category, and also trying not to “borrow” from other categories due to carefree spending.

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There are different ways to budget and even more budgeting apps on the Playstore and Appstore. However, budgeting requires discipline and a mindset change. So in order for budgeting to work for you, you have to intentionally make it work for you.