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What's Your System?

What's Your System?

June 14, 2022

“You need a budget!” 

It’s often one of the first pieces of financial advice many of us hear. Budgeting isn’t a one-size-fits-all exercise, though. It’s about finding the system that works for you. Fortunately, there are multiple ways to get started and/or refine your current budgeting approaching.

3 Types of Budgets 

The Line-Item Budget. This is the most basic budgeting method. You list out all of your expenses, both necessary and discretionary in a system like Excel or an app like Mint, then categorize each line item into a category, like “housing” or “meals out.” By totaling everything up into categories, you can see where you are – or aren’t – spending your money and whether or not that spending is consistent with your goals.

The 50/30/20 Budget. 50/30/20 splits your budget into three big categories: Needs (50%), Wants (30%), and Savings & Debt (20%). This method is great for getting a high-level view of your spending habits. It’s also great for giving you a benchmark. Spent too much on wants last month? Look for opportunities to cut back to get back to the 30% level.

The “Pay Yourself First” Budget. You got paid. Now pay yourself! This method is great for those who have a hard time building their savings/emergency funds. Start by setting aside the money you wish to save each month. If you’re still working, ask your payroll administrator to direct deposit a portion of your pay directly into savings. Then, spend the rest of your money as needed. The catch is that you should limit how often and how much you dip into your savings to cover any spending that exceeds what you budgeted for.

You’ve likely tried one or two of these budgeting strategies. If they didn’t work for you, it may be that they weren’t the right fit for the way you work. That’s okay! Everyone is different. The important thing is that you find the right tools and strategies that help you reach what you want to achieve. If one didn’t work in the past, try another!!! Most of all, don’t feel frustrated, budgets are always a work in progress.

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