Many of you probably guessed what word I’m referring to. Budgets! Some of you are already cringing and some are excited to keep reading. We are going to talk about my personal opinions on budgets and different kinds of budgets.
First thing first, everyone needs a budget. I don’t care if you make $5 a year or $5 million a year, you need to know where it’s going. The funny thing is, if you look at “rich” people and multi-million dollar companies they all have budgets. It’s the “broke” people that say they are unnecessary. If Amazon and Walmart make billions of dollars and still need a budget, I think we can agree we should have one as well.
Now that we have established that we should have a budget, what does that entail? Budgets do not have to be difficult. You are just deciding where your money is going ahead of time. Take your monthly income and subtract total expenses. The main focus is making sure your expenses are not greater than your income. That is the simplest form of budgeting. Now let’s get into some more in depth methods.
Envelope Method
This is a method that many people live by and I’m actually trying it right now. You make your budget and each line item in your budget gets its own envelope. You would have an envelope for bills, food, gas, entertainment, and anything else that is in your budget. Once the money is gone it’s gone. That is what I like about this method. Budgeting doesn’t mean you can’t have fun. It just means you have given yourself guidelines. Let’s say you have $100 for entertainment. You could go to multiple movies or different social events. This method also forces you to be creative to limit your spending or find free activities. It’s something about seeing that cash leave your envelope that makes you want to hold on to it. Sliding your debit card can feel numb and you don’t feel the effects of spending like you do with cash.
Some people even go a step further with this method. You could write your expenses on the envelope and keep the receipts inside. For example, for your food envelope you would write everywhere you spent money for food and put the receipts inside. People like this method because they can save their envelopes for review at the end of the year. Plus you have all your receipts saved in case you need to take something back.
Zero based budget
This is one of Dave Ramsey’s favorite methods. In this method you budget every single penny. Every dollar has a home. There is no “play” money just lingering. If you earn $3,000 a month, you want everything you spend, save, invest, and give to equal $3,000. This method is helpful for those that struggle with impulse buys or those that think anything that isn’t “bill money” is up for grabs. It’s especially helpful for those working on paying off debt. Budgeting an extra $400 for credit card debt is much better than leaving that $400 floating around with no destination.
Dave Ramsey also has a free app called Every Dollar that helps you with your budget. It literally takes 5-10 minutes to set up your budget for the month.
Main Takeaways
- Budgets are as flexible or strict as YOU make them. If you want to budget $200 for McDonald’s, that’s your decision.
- Do what works for you. Most people like monthly budgets but if you do better with weekly budgets than go for it.
- There are too many budgeting apps for anybody to not have a budget.
- Start small. If you have been spending $200 on fast food, try to cut it to $150 then $100 instead of cutting it to 0 immediately. You could also challenge yourself to pack your lunch and meal prep for an entire week.
- Encourage a friend to budget with you! Do you usually go out to lunch or to happy hour with the same person or group of friends? Ask them to join you. Get together on Sundays and meal prep together. It will be fun and motivate you to keep going.
Do you already have a budget? If so, what method are you using? If not, do you think you will give budgeting a chance? Comment below and let me know.
