Only around 47% of Americans use a budgeting strategy to manage their finances.

Budgeting methods can help you be organized with your spending, and help you save more each month. There are multiple strategies that people use, so it’s important to understand your choices so that you can pick the best one for you.

For 5 different budget types you could use, keep reading.

1. 50-30-20 Budget

This is one of the simplest budgeting methods there is, so anyone can do it. It essentially dictates how you split up your pay after tax. 50% goes on needs, 30% on wants, and 20% goes into savings.

If you have debts to pay off this will come out of the 20%. This is one of the best budget plans for beginners as it’s easy to stick to and you don’t have to do much to keep track of it. Using this method can also make you feel less guilty about spending money on yourself as you already have an allocated percentage for that.

2. Zero-Sum Budgeting

This is a bit different from other money-saving plans as it’s based on spending everything you earn. The idea is that you have a specific purpose for every dollar, meaning you’ll ultimately have nothing left over. Each dollar can be assigned to something like savings, expenses, or other spending.

This is one of the more difficult types of budgets to adhere to, so you may need some assistance. RVW Walth is an experienced financial advisory company and may be able to offer you some guidance. Head over to rvwwealth.com to find out more about their services.

3. Line-Item Budget

This is one of the more typical types of financial plans where you group your expenses into different categories to calculate spending for each group. This is fairly easy to do using a spreadsheet.

The idea is to come up with a target for how much you’ll spend on each expense which allows you to work out the total for each category. You can look at your transactions from the last few months to get an idea of your spending.

This method is commonly used by businesses as it makes it easy to compare and analyze spending between years. It also helps with tracking expenses and income.

4. Envelope System

For this system, you’ll have multiple envelopes for your spending categories, and a set amount of money in each. This doesn’t have to be physical envelopes, as you can do the same thing using separate bank accounts.

This is a good way to prevent overspending and allows you to closely monitor your expenses. Doing this with cash is also more tangible, making all expenditures feel more ‘real’, which should prevent you from things like impulse buying.

One downside to this strategy is that if you’re using envelopes you won’t be able to increase your savings through a savings account.

5. Hybrid Budget

A hybrid budget employs strategies from more than one other type. An example of this would be to use a 50-20-30 plan so you allocate 20% to savings, then use the envelope method just for the 30% of spending.

Choosing Between Different Budget Types

With all these different budget types available, you need to figure out what is best for you. Look at what your current sending habits are and determine what you need to change. Think about whether you want to better track your money, or just save a bit more, and decide based on your goals.

For more finance-related articles check out some of our other blog posts.

Jane