Budgeting is a financial necessity. One that you should stop ignoring if you have been doing so until you read this article. Budgeting Plans help you make the best of your money within the time frame of a month which is the common time frame for most people.
Even knowing how necessary budgeting plans are it could still be pretty difficult and tricky to know exactly how to allocate your money.
There are a number of budgeting plans out there and if you already have one that works for you then you should stick to that. If, however, you do not, we have two options for you that could make all the difference in making your money last longer.
Two Budgeting Plans You Should Consider
The 50/20/30 Rule
The 50/20/30 rule is simply broken down as; 50 percent to necessities, 20 percent to financial goals, and 30 percent to lifestyle.
With this rule, the first 50 percent of your salary would go to necessities like rent, loan payments and school fees. Necessities could also include food, clothing and transportation but those could double as lifestyle choices.
Lifestyle choices should take 30 percent of your salary and besides the ones mentioned initially, could include; shopping, entertainment and hobby furnishing. The final 20% of your salary should go toward savings and debt, or financial goals, including paying down credit-card debt, saving for retirement, building an emergency fund, or saving up for a vacation.
This budgeting plan was popularized by US Senator Elizabeth Warren and her daughter Amelia Warren Tyagi in their book, All Your Worth. The authors described it as “the right place for most people most of the time, and it is a good place to aim for in your lifetime money plan.” Experts have agreed that it is a good basic rule for getting started when it comes to budgeting plans.
The Zero-Sum Budget
Can you save money by spending your entire budget each month? The zero-sum budget certainly thinks so. In this budgeting plan, every dime you make is meant to be allocated for a specific purpose.
You would first have to determine how much money you make every month by figuring out how many paychecks you receive and how much you’ll earn after tax.
After that, you allocate the money for the current month for what you will need next month. That means listing all your fixed bills, including smaller expenditures and totalling.
When that is done, compare and contrast. Deduct your bills from your earnings and then allocate the rest of the funds as a miscellaneous category that could include money for fun, long time savings and other such stuff.
If you have no money to put in your miscellaneous category after paying your bills then it is a sure sign that you need to look again at your spending strategy. Look for any way you can save money and do it.