Creating A Monthly Budget 101: Which Type of Budgeting Works Best for You?
Whether you’re trying to reign in your spending or plan for retirement, determining the best budgeting system for you is always a good idea. However, this is often easier said than done, which is why the team from CalendarBudget is here to help you. Our monthly budget planner is a great way to track and forecast your money and spending habits.
The Difference Between a Budget & a Financial Plan
Although sometimes you might use the terms budget and financial plan interchangeably, they’re not exactly the same thing. Some of the major differences between the two are that a financial plan helps you track your progress on a quarterly or semi-annual basis, whereas a budget is used more frequently – like on a daily, weekly or monthly basis.
Additionally, a financial plan can be thought of as a long-term strategy for reaching your financial goals. Healthy budgeting is how you’re able to achieve these long-term objectives, even if they may be 5, 10, or 15 years away. In addition, financial planning will help you address big-ticket items like buying a car or a house or funding your child’s education.
What Type of Budgeter Are You?
Just like everyone is different, there’s no one-size-fits-all budgeting style. What works for some might not work for others. But some common budget types offer flexibility, such as:
This type of budget is for someone that likes having a clear handle on every aspect of their spending each month, so there are no surprises, at least none that they could have anticipated. This is also referred to as the 50/30/20 budget, and it’s when you spend 50% on your needs (mortgage, car payments, groceries, etc.), 30% on your wants (recreational activities, vacations, new clothes, etc.), and 20% on savings (education, retirement, etc.).
For those who want to ratchet up their savings, 20% is a great place to start, then, if you find you might be able to save more, try moving the number up 1% each month until you reach a comfortable balance. If you find 20% is too much for you at first, start with a lower number and work your way up.
The Me-First Budget
This budget is a lot like it sounds: it focuses on your immediate financial needs before anything else. But what does this mean exactly? This is where you put your savings first before anything else. Of course, it doesn’t mean throwing the bills out the window, but it does mean skimming the fat off some of the other areas in your life to save as much as you possibly can. By controlling both your time and savings, you can maximize your potential for success down the road.
Also referred to as “the spending first budget,” this is when you take a look at your expenses each month and then save what’s left. It’s simplistic and might sound like it’s going against many of the budgeting rules, but for some, this can be a step in the right direction, especially for those new to budgeting. If you can manage to keep a tight hold on your spending each month, this could be the budget for you to get you started.
This zero-based budget is a somewhat famous budget first implemented by a private equity group (3G Capital), and it’s a pretty simple idea. You take your monthly finances and allocate money to different budget categories until there’s nothing left. It will likely take some tweaking each month until you get things just right.
This is sort of an anti-budget you can follow for those who spend a minimal amount of money each month since you’ve already gotten your spending under control. All you do is set aside a certain percentage of your income each month then spend the rest. But, again, this often works best for those who are already thrifty and frugal by nature.
The No Budget
It might sound crazy but for some, having no budget at all works. There are many people out there who don’t track anything and still spend below their means. However, doing so for long periods might also mean that you won’t be saving enough to meet your financial goals for the future.
The Envelope Budget
This type of budget will divide your money into different spending categories. Once you’ve figured out how much you’ll need for each category every month, you’ll then place this money into an envelope for each category. This will help minimize overspending and provide you with a set amount of money for each area. Some of the most important expenditures should include gas, groceries, dining out, household items, pet care, children’s items, clothing, health, and grooming. When creating your envelope budget each month, it’s important to ensure that your overall expenditures don’t exceed your monthly income.
Contact us for monthly budget tools & money management software!
Whether you’re a no-budget type of person or a balancer, the right monthly budget tool can help make it much easier to track your expenses and ensure you’re saving for the future. Of course, it’s always good to track your expenses to make sure you have the necessary data for banks or reporting information for your taxes.
CalendarBudget is designed to help you track and forecast how you’re using your money by providing an easy-to-use calendar. With our software, you’ll be able to plan for your financial goals, reduce your debt, balance your accounts, as well as set your financial goals months and years into the future. You’ll also be able to keep track of when bill payments are due with calendar alerts and plan for major upcoming expenses.
Our money management app tracks your spending against your budget plan, so you know precisely where to focus your saving efforts. It also discourages impulse buying by giving you a clear picture of how such things will affect your finances.
To learn more about how the CalendarBudget app can help you reach your future financial goals and meet your day-to-day obligations, watch this video or contact us today for a risk-free, 30-day trial!
Eric Poulin is a Co-Founder of CalendarBudget. With a Bachelor of Science in Computer Science, 20 years of software development experience and owner of 2 businesses, Eric created CalendarBudget shortly after being married to help plan his family's finances. Now, as a husband and father of 5 teenage girls, Eric helps others get their finances in control.