FTC: This post is not sponsored and I am not a financial advisor. All thoughts and weird opinions are my own. 

If you’re new here: WELCOME! If you’re a returning reader: WELCOME BACK! Now that the pleasantries are out of the way let’s get right to business shall we. BUDGETING. A bit of a dirty word in the debt free community, but an absolute necessary evil on your debt free journey. 

To be financially literate, and financially responsible, you have to have a budget, and it really needs to be one that you can stick to. Or at least work with. Most of the time, people look at budgets as a laborious task, but it is in fact a labor of love that will set your finances on the right path towards financial freedom. These aren’t simply buzzwords that I know you’re tired of hearing, these are the FACTS.

So what do you do if you hate budgets, but you know you need one to thrive. You switch to a better budgeting technique. Below I’ve broken down seven of the most popular (yes.. there are more than 7) budgeting techniques that you could try on for size. And don’t fret if you try and fail, you can try again or switch to a different technique. 

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Budgeting techniques

Which Budgeting Technique Is Best For You?

1. 50/30/20 Budgeting Technique

This was the first budgeting technique I ran into and tried. This technique requires you to split your expenses in the following percentage categories. Fifty percent of your income should go towards necessities (food, rent/mortgage/ bills…etc) Thirty percent of your income should go towards things that you want and the final twenty percent goes towards saving and debt repayment. 

Who Should Use This Technique

I think this technique is great for those just starting out on their budgeting journey. Obviously the reason I gravitated towards this budgeting technique initially was because I had a lot of student loan debt I wanted to target. I’m also a creature of immense habit so spending approximately the same monthly amount on things from my check kept me honest in my expenses, and focused for the most part. My financial foundation was definitely securely laid by using this technique. And as a teacher with a pretty shitty income, I can attest that this technique can work for anyone, but works well for people with low to mid range incomes specifically.  

Cons: 

I felt like i was spending too much on myself and not enough on my debt or my savings. I wanted to build a bigger emergency fund and target the principal on my balances. This technique did not allot for that as my savings and debt received the lowest percentage of my income. 

2. Zero Based Budgeting Technique

This was the technique I adopted after my run with the 50/30/20 technique came to an end. What this method does is create a funnel for every single dollar you bring in. This means you have no extra expendable money lying around because every single dollar has  purpose. With this method income-expenses = zero in every period. Let me warn you… I didn’t last long on this technique, but it does help curb your ability to spend on nonsense (coughs with a full Target cart of non necessities) Your spending habits will improve dramatically using this particular budgeting technique. 

Who Should Use This Technique

You can change up where each dollar goes each month/week/day…etc. It is not particularly strict with how you spend your money, it just requires each dollar to be accounted for. It is not constraining in the fact that you can’t change up percentages or necessities as they arise. However it is not a hands off willy nilly type of budgeting technique. You do have to have control, and track your expenses meticulously. You are analyzing your money consistently to see where it goes and if it is being used in the best way possible. Nothing like staring your poor spending choices in the face to make you stop them. 

Using this technique I was able to decide how much of my money would go into my savings and towards my debt, after my main bills were paid off. Needless to say I started spending far less on myself, and more on my Sallie Mae bill. 

Cons

This technique takes up a lot of time and brain power. I hate math, and although I am extremely organized this level of budgeting takes far too much tracking. I don’t want to track my every dollar so closely.

3. Snowball Budgeting Technique

Yup… can’t write about finance without bringing in Dave Ramsey can we? The snowball budget technique stems from the debt repayment plan of the same name. This budgeting technique is all about your debts as opposed to the previously mentioned. You allot an amount of money that you can put towards your lowest debt as an extra principal payment. You keep sending that extra amount over until the debt is paid off. You then take that extra money and the regular payment on that loan and start throwing it aggressively at your next smallest loan. 

Who Should Use This Technique

Pretty much anyone with debt should consider using this budgeting technique or at least using it as one of them. I used the avalanche method which is a similar theory except with a focus on interest rates instead of balance. 

Cons

People with lots of financial responsibility may find this difficult to apply. Since you have other things you must pay for, it will be difficult tot set aside the initial extra payment towards your smallest loan. It is also an issue for those with low income or fixed income that possess loans of any kind. Also… if you choose the snowball method, remember that your loans will still be gaining compound interest as you pay from smallest to largest loan balance. 

4. Reverse Budgeting Technique

I dabbled a bit in the reverse budgeting technique and it for sure is a major key that enabled me to save 55,000 dollars on a teacher salary.  When you use this budgeting technique you decide on how much money you want to save and then you automate it.  The rest of your money should go towards your expenses. In following this technique I saved about 17,500 dollars I year which I used towards paying down my student loans and eventually to put a downpayment on my home.  

Who Should Use This Technique

This technique offers you more freedom and is less stifling than other budgeting techniques. You get to decide on amounts Iso you have far more control over how stringent the budget is for yourself. 

Cons

If you are not a responsible spender this budgeting technique isn’t going to make you any better. It is not going to hold you accountable, and you may find that because it is less stringent you struggle more to sticking to the plan. 

5. Traditional Budgeting Technique

This is one of the original budget techniques, hence the name. You use your past budgets to predict your future budgets.
You take some time and sit down tp analyze what you have spent in prior months. In doing so you can assume what you will spend in months to come in each category. That is then the budget you set up for yourself to stick to. 

Who Should Use This Technique

If you have a steady job and receive the same income from week to week/ month to month then the traditional budget technique is your jam.  This technique also works well if your life is pretty stable as well. So if you’re not planning on making any huge life shifts like a baby, new home, or new job this may be the best budgeting method to take. 

Cons

If you’re someone like me who doesn’t like rules, likes to bend or break rules than this technique is not for your as it is very stringent and inflexible. I don’t like traditional anything. If you ask my friends you’ll hear them tell you I’m against everything traditional, and if you share the same millennial vibe then this is not the method for you. If you’re also not organized, or bad at calculating your normal expenses your budget will be skewed and or inaccurate most of the time. 

6. 80/20 Budgeting Technique

Another budget technique with percentages how unexpected! With this technique you take 20% of your take home pay and put it towards your savings account. The rest of the 80% go towards your expenses. Easy! No huge calculations to make, no writing out formal budgets. Simply take 20% of whatever you bring home, even if it varies and save it.  

You can not save less than 20 percent, but if you have the financial opportunity to do so, you can always increase the percentage of your income that goes towards saving. 

Who Should Use This Technique

This technique is very beginner friendly so I always recommend it to my friends who want to try out budgeting but can’t be bothered to do very much work (ie: me). You don’t need to track your expenses, and you have control on how much to save just as long as it doesn’t go below 20%.

Cons

If you have trouble preventing pointless purchases this technique will be of no service to you. You are not required to track your expenses and how much money you’ve spent. This can help your shopping tendencies continue to negatively impact your wallet and journey towards financial freedom.

7. Cash Only Budgeting Technique

Our final budget technique is the cash only method which is exactly what it sounds like. You should (really you must) use this technique with another budget technique because it can’t stand on its own. You pay all of your expenses with only cash. This means there are no credit cards, debit cards, or checks involved in your day to day. This means you don’t owe anything to any creditors at the end of the month and you’re not carrying over balances that are going to gain interest. You only buy what you can pay for/ afford with cash. 

Who Should Use This Technique

If you know you have trouble managing your credit card usage or you struggle with creating new debt this technique may be just what you need to help set you on the right path. This prevents additional debt from building on top of the debts you may already be paying off. If you have good credit then you want to make sure that you give this technique a second look, as not using credit cards will not really impact your score. 

Cons

If you have less than stellar credit you won’t be able to build your credit using this method. You will be able to lift your credit using other methods and strategies, however using credit responsibly is a key part of the categories the credit bureaus look at.  Let’s not even think about the amount of times I’ve lost money only to find it in a random pants pocket. I have bad luck with cash, don;’t like losing it, and don’t want it to be stolen. Carrying cards just gives me a greater sense of safety and convenience, then to carry around a purse with all of my credit cards. 

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Until next time,