| Hi Taylor:
I'm looking at different options for budgeting software and keep hearing
about various styles of budgeting. I always thought the options were
to save money or spend it, but I guess there's more to it? - Diego
Hi Diego: Budgeting can be as simple or as complicated as you
choose to make it. It's almost always difficult for people whose finances
aren't in great shape, but the approach you take to getting organized
usually comes down to personal preference.
different systems. Not sure which names you've heard, but
I most commonly see the traditional "50/30/20" budget, zero-based
budgeting, and what some people call the "pay yourself first"
method. The traditional is a simplified system of putting 50%
of your earnings toward your needs, 30% toward the stuff you want,
and 20% into savings. I push most clients toward a 70/10/10/10
(needs, wants, investments, charity), but it follows the same
philosophy. Zero-based budgeting is great for people trying to
overcome bad habits or who just love meticulous planning. Every
time you get paid, you assign every dollar a job; everything is
categorized from rent to clothing to travel to insurance, so you
have to know exactly what your necessary spending is each month
before you move on to the fun stuff. With the pay yourself first
model, you put as much into savings as possible and then try to
spend very frugally on everything else.
2. What works for you? If anyone tells you their budgeting
approach is the best and will work for anyone who tries it, they're
lying. A friend of mine who works for a budgeting company (YNAB)
often tells potential customers that the YNAB system isn't right
for everyone. It comes down to how your brain works and what's
going to help you make the best financial decisions. If that means
labeling a bunch of envelopes and filling them with $5 bills,
so be it.
3. The bottom line. Whatever style you choose, the most important
thing is setting rules and sticking to them. It's very easy to
overspend and blame it on your circumstances, so you need to find
a system that helps you hold yourself accountable. Some months
you might not have money to put toward charity or savings, but
you should at least find a method that helps you improve your
situation instead of making it worse. I recommend trying the different
apps with free trial periods to see what you feel comfortable
| It's essential
to budget thoughtfully, so asking questions is a great place to start.
Try out different things until you find what works for you, then enjoy
the financial rewards. Best of luck!
© Taylor Kovar
January 8, 2022
More "Go Far With Kovar"
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