There are many types of budgets to help you manage your money. I really wish there had been someone around to tell me that at the age of 19 when I was starting to manage my money for the first time.
The idea behind this post is to show you what your options are as a beginner. Or as someone who has built many budgets but never found one that worked.
Don’t worry, the past issues with budgeting occurred because the budget type didn’t fit your situation.
You are also not alone, 55% of Americans do not budget (According to the Penny Hoarder Survey).
The same survey found:
- 19% don’t due to lack of time or energy
- 19% don’t due to lack of organization
- 6% don’t since they overspend anyway
If your budget works, the above will not matter anymore. All you need is to know how much money you bring home and that your budget will change over time.
Maybe even from month to month!
The budget needs to fit you, not the other way around. You just need to find your best method.
In addition, if you are looking for a quick basic budget to get you started. I highly recommend you read the post before this one, “How to create a budget for beginners.”
It will give you a starting point while you are waiting for the more detailed posts on each budget method listed in this overview.
1. Monthly Budget (aka Weekly/Biweekly Budget)
This method, also referred to as the weekly or biweekly budget, relies on how often you are paid. My current budgeting method is this one.
It seems to work seamlessly with a biweekly paycheck rotation.
How it works:
Look at next month’s calendar and mark the dates you are paid. Then create a list of all your expenses from the previous month.
Use the due dates to decide which paycheck will be responsible for paying each bill. The theory is each paycheck you earn should be able to pay the bills that become due until the next paycheck.
Skills Gained:
This one requires a little bit of preparation each month.
You will learn:
- How much your basic needs and debt cost per month
- How to track your spending
- Ways to make your budget as realistic as possible for your current situation
2. Cash Envelope System
Just a heads up, since the Covid-19 pandemic, this budget system may be a little more difficult to use. In my area, there are locations that still do not accept cash and require cards for all purchases.
Also with online bill payment, it may not be ideal or possible to pay your utilities and mortgage with cash. You may need to be flexible with this one.
How it works:
The theory behind this method is to pay cash for all of the household bills to prevent overspending. Using your previous month’s bank statements you will create a list of your needs, debts, and wants (I like to call them extras).
Add together how much you are spending on each area of your budget. Then create an envelope for each category.
When you receive your paycheck, withdraw the cash from your bank account. Then put the appropriate amounts of cash into each envelope.
The amount in each envelope only pays for the bill that is marked on it. Once the envelope is empty for an expense, you cannot spend any more on that category.
Skills Gained:
You will start being able to say no to certain purchases. You will stop overspending and track what you are spending with a little more ease.
The desired skill to learn is to stop using credit cards.
More Articles You May Be Interested In:
How to Create a Budget for Beginners
Why Money Won’t Solve Your Debt Problems
How to Create A Grocery Budget
3. Values-Based Budget
When I started sticking to a budgeting habit in 2017, I started with $85,000 in debt. Now that my current debt is $35,258 and some change.
I am considering switching from the biweekly budget method to this one. My financial story is finally to a place where I can focus on expenses that better my life instead of expenses that strain my life.
How it works:
This method puts more emphasis on areas of your budget that mean the most to you. After you create a budget that includes what you need to survive (needs and debts).
Review the rest of your previous month’s spending to figure out what has the most value to you. Include only those expenses in your budget. The rest you will cut until you start paying off debt.
Skills Gained:
This type of budget will make you more decisive in your daily spending. You will also be able to stick with this budget method since the items that mean the most to you are still in your budget.
The theory is to prevent you from feeling deprived.
4. No-Budget (aka Spending First Budget)
The no-budget is similar to the monthly budget method explained above. The only difference is you are not creating a budget for an entire month in one sitting.
You are only thinking as far ahead as the next payday.
How it works:
This budget type forces you to pay all of your upcoming bills before you start spending. On each payday, you will sit down and manually pay all of the bills coming due until your next pay date.
What remains of your paycheck is what you have left to spend freely.
Skills Gained:
You are able to track your spending without having to create a daily spend tracker sheet. You will no longer miss paying a bill due to overspending.
5. Anti-Budget
Again, you will see similarities in this budget compared to the others discussed in this blog post. The Anti-Budget is just like the no-budget except you set up autopay for all of your bills.
How it works:
This budget method requires fully automated bill pay. You will need to setup accounts with all of your creditors.
Then program the credit card for them to keep on file so your bank account can be charged automatically each month. The theory is you will save time since you will not need to sit down each payday and manually pay your bills.
Keep in mind, some of your auto payments will change each month like your utilities.
Skills Gained:
You will learn exactly how much you spend each month. Most of your spending will be consistent. You will also learn which bills fluctuate and how you want to account for that each month.
Concluding Thoughts
How do you feel at this point? Does creating your own budget seem a little more doable? I hope that both of those answers are yes.
Over the next 5 weeks, I will be posting user guides to give you all of the details for each of the 5 budget methods listed above. You can try out each budget as they are posted to figure out which one is right for you.
If you are short on time, you can pick one method listed in this overview to try. Then tune in when that user guide has been posted.
Each budget user guide will post in the following order:
- Monthly Budget (aka Weekly/Biweekly Budget)
- Cash Budget
- Values-Based Budget
- No Budget aka Spending First Budget
- Anti-Budget
If you are not sure which direction to go, start with the first user guide next week or try the basic budget in my previous post, “how to create a budget for beginners.” This post also includes a checklist on how to locate all of your expenses and debt.
Happy Reading!
References
https://www.thepennyhoarder.com/budgeting/budgeting-statistics/
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