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5 Different Budgeting Methods to Help You Save Money



Many of us would love to have better control over our money. Sometimes it just seems to vanish, and you’re left scratching your head wondering where it all went.  

If this sounds familiar, it sounds like you need to try out a budgeting method. With so many different budgeting methods out there, which one is the right one? 

The short answer is that the right one is the one that works for you. But if you’re not sure where to start, here are five popular methods to try out. 

1. The 50/30/20 method 

The 50/30/20 is a simple budgeting method that helps you allocate your expenses and savings more effectively. 

The rules of this method say that you should set aside 50% of your income after tax for your needs. These are unavoidable expenses such as rent/mortgage payments, bills, insurance, or debt repayments.  

Aim to set aside 20% for savings, such as investment accounts, IRA contributions or for an emergency fund. The remaining 30% is for anything else you might want.  

The great thing about this method is that it’s not about banning yourself from spending money. It’s just about making sure the proportions of your spending are more manageable.  

2. The 80/20 method 

The 80/20 is another method that works with proportions but it’s less rigid than the 50/30/20 method.  

This simple method means that 80% of your take-home earnings go to your expenses (divided as you see fit) and the remaining 20% goes to savings.  

The best way to do it is to take your 20% out and put it into savings as soon as you get paid. That way you aren’t tempted to dip into what’s left at the end of the month.  

3. The envelope method 

The envelope method is a classic way to budget your money. With this method, you decide how much to allocate to various expenses, savings or wants and then withdraw that money in cash. You then place the cash in different envelopes for different expenses.  

You can only spend what’s available in the envelope for that particular category of spending. The idea is to prevent you from overspending because it limits what you can spend.  

While this might seem outdated, you can adapt the envelope method for the modern bank account. Rather than envelopes, you could set up separate savings pots or accounts to use for different things.  

4. Zero-based budgeting 

With zero-based budgeting, you give every dollar a purpose. By the end of the month, every last cent must have been used in some way, but that doesn’t mean you need to spend it all! 

The goal at the end of the month is for your income minus your expenses to equal zero. You can allocate your money however you want but the best way to do it is to sit down at the start of the month and decide where every dollar will go.  

For example, your list could include $800 for rent, $100 to save for an emergency fund, $150 for retirement accounts, $200 for groceries and so on.  

This exercise is a great way to become more conscious of your spending and how much money you need to set aside for different areas of your life. You might need to do some tweaking each month as you get a better idea of how much you need to allocate to different areas.  

5. Value-based budgeting 

Value-based budgeting is a process of categorizing spending according to your values. This type of budgeting method requires a bit of a mindset shift as well as a behavioral shift.  

To get started, you will need to determine your core values. This might require a bit of soul-searching. What’s most important to you? It could be family, socializing, travel, community or health. Try to pick no more than five.  

When reviewing last month’s expenses, try to allocate each unnecessary expense to one of your values. This can help draw your attention to mindless spending on things that don’t truly matter to you.  

This could be a great alternative method for those who don’t like rigid budgets. 

Any of these budgeting methods can help you save money, but it all depends on which method works for you. Some methods might feel too restrictive, like the 50/30/20 method, whereas others might be too vague, like value-based budgeting.  

If you’re not sure which one will work best for you, why not try one out for a month or two to see how you get on. 

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