Part 3: The Top Budgeting Techniques
Continuing on our budgeting blogs, the next one is ‘The Top Budgeting Techniques’. As you know, budgeting is an essential part of our daily lives, to the point where if we do not do it, we could find ourselves in something as serious as debt. But, thankfully, there are plenty of easy and simple methods which will keep you on track. So far, we have learnt ‘What is Budgeting‘ and ‘Why Should We Budget?’ therefore, you should be starting to become more aware and involved in what it entails. Finding the perfect technique does not come overnight, you may have to try multiple first. But, to help you out, we have put together three of the top budgeting techniques for you to start your journey with.
We have mentioned this method multiple times throughout our previous blogs, but it really is worth the hype. It is one of the most commonly used methods by people of all ages. How it works is you need to divide your income into three separate categories. These include:
- 50% – Needs: The needs section covers those outgoings which are essential, that you need to keep prioritised in your budget. It could be things like bills, mortgages, food shopping and other payments which cannot be missed.
- 30% – Wants: These are the things that add that extra bit of luxury to your life. For example, hair cuts, new clothes and even eating out.
- 20% – Savings: 20% of your income should be dedicated to your savings, this way you are always able to have something to fall back on if necessary.
The Sub-Savings Account Method
This is another useful method which people use for specific goals. Budgeting is so much more than just sectioning your finances, it gives you the chance to thoroughly think through every little thing. The sub-saving method allows you to budget for things individually, whether this is something small or large. Typically, you would set up multiple savings accounts and name them all different things like ‘holiday savings’ or ‘house repairs’ etc. Set a specific goal of how much you want to save and then work out how many months you need to save it all up.
The Envelope Method
The envelope method is a simple way to budget. It’s quite similar to the sub saving account method but just for the little twist. To start off, you need to split up all of your outgoings and incomings using something like a bank statement. Once you have done this you need to create an envelope for each expense, you will find it easier to make notes on the front of the envelope to stay on track. Following this you will fill the envelopes each month with the amount necessary, the remaining can be spent elsewhere.
All of these methods will work differently for different people with different incomes. Therefore, if you feel as though they do not work for you as an individual, do not lose hope as there are plenty more other methods which will. Feel free to visit some of our other blogs to find out more information, and if you still do not know where to look the Money Advice Service may offer you what you need. If you slip up when budgeting and become financially unstable, do not stress too much. Here at LoanPig, we can help those who need emergency loans in situations like this. To find out more click here…