Once you’ve decided it’s time to create a budget, or get back on track with an updated spending plan, you’ll have more than a few options to choose from. You can go old school and use notebooks, or spreadsheets to stay organized, or you can grab your laptop, phone or tablet and investigate budgeting apps. All of these can be effective ways to keep track of your spending and saving as you begin the extremely satisfying journey of telling your money what to do every month.
The best thing about a budget is that it’s flexible enough that it can be tweaked to fit your individual needs from month to month. The important thing is that sticking with whatever method you choose brings more awareness to your financial life, offering a realistic picture of how much is coming into and leaving your accounts month-to-month.
Budgeting methods are not one-size-fits-all. For example, people who consistently spend less than they earn, and who already have an emergency fund and retirement accounts, will likely need a different method of budgeting than someone who is just getting started. Those of us who are still striving to take control of our finances so we can whittle away at credit card debt and build up an emergency cushion will likely want to start with a more basic budget. Here are a few approaches to consider:
The Backwards Budget
The Backwards Budget has three steps. First, save for your goals in a dedicated savings account or investment account (or accounts). Second, pay for your needs: Rent, groceries, internet, cell phone bill, student loans, etc. And third, enjoy anything in the “wants” category with whatever money you have left over — dinners out, vacations, new clothing, the sky’s the limit because you chose to take care of your top two life priorities first.
The Zero-Sum Budget
If you like equations that work out just right, zero-sum budgeting might be right for you. With this budget, you essentially subtract every dollar you spend or save from your starting amount of take-home pay. That means you’re in charge of finding a specific purpose for every single dollar you earn, (whether it’s rent, a savings account, your investment portfolio or dinner out) and at the end of each month, you’ll total everything up and find that every single cent has a home. So if you started with $2,000 at the beginning of the month, you’d be left with $0.00 unaccounted for by the time the 31st rolls around, hence the name.
The 50/30/20 budget
This budget is similar to the others in that you’re thinking about how the three most important categories of your budget — needs, savings, and wants — will be covered. But this budget assigns an exact percentage of your earnings to each category, which is how it gets its name like this: Needs (50%), Wants (30%), Savings (20%). It’s okay if you’re off by a few dollars every month — the goal here is that you’re thinking about each category of your budget, and as long as you stay in line with your bigger goals, then you’re doing great!
Whichever budget you choose, sticking to it is no easy task — but it is an enormously satisfying one. Telling your money where to go each month gives you feelings of control, power and independence. All the good stuff. Start by tracking your spending for a month or two… And then? We’ve got five suggestions to help you nail it here!
Finally, for those who prefer the ease that technology offers, there is a plethora of mobile apps and budgeting software to help manage your finances. You can use these with the budgeting techniques mentioned above, or on their own. Nerdwallet named eight companies to its list of best budget apps in 2022. For most of these, the app can connect with financial accounts, plus categorize and track spending. In mid-2022 all of the apps listed had at least 4.5 stars out of 5 in the iOS App Store or on Google Play, and at least 1,000 reviews, notes Nerdwallet. They are: Mint, YNAB, Goodbudget, EveryDollar, Personal Capital, PocketGuard, Honeydue and Fudget.