One aspect of budgeting that lets experts agree focuses on the fact that no one method offers the perfect solution for controlling expenditures. With different budgeting methods available, you can find one that matches your preferences and lets you do it the way that you want. Budgeting presents plenty of challenges, and you have no need to complicate matters by using one that cramps your style or makes you unhappy. Make sure to choose one that you can accept and put into practice to help you control your expenditures.
Understanding the Statistics
Americans carry a high level of indebtedness that produces an average of more than $135,000 per household from a range of expenditures. Mortgages comprise the greatest single source of debt with an average of $184,417 followed by student loans at almost $48,000 and auto loans at just over 28,000. The debt on revolving credit cards, the kind that let you carry a balance from month to month, amounts to almost $7,000.
1. Using the Envelope Method
Anyone who has trouble resisting credit card purchases can choose a cash-only method. On payday, you can put cash into envelopes that cover the types of things that you buy. Money Nuggets suggests that you need to figure out how much you can afford to spend on each category after you pay your bills and your rent or mortgage. Carry only the envelope that you need for the purchase that you plan to make when you go to the grocery or when you go to the movies. If you have nothing left in an envelope, you may not borrow from another.
2. Choosing Zero-Base Budgeting
A good approach if you find that you overspend each month, a zero-base method can help you prevent the habit. You must write down exactly how much money comes in and how much goes out even down to a penny. The method lets you have zero money left at the end of the month if you do it correctly. It does not allow for “unforeseen spending,” but you can pay into an emergency fund that still makes your zero-balance achievable. The beginning of the month gives you the best time for setting up your zero-base budget, and you need to do it every month.
3. Simplifying With the 50/30/20 Method
With your calculator, you can figure out how to proportion your after-tax income. The method requires you to allocate the largest percentage to bills, rent, food and other things that create a real need. You can devote 30 percent to things that you want but do not need, and you may choose to spend it on dining out or buying a new outfit. The remaining 20 percent goes to your savings account or to reduce your debt. The method works best when you earn a steady monthly income.
4. Paying by Half Method
If you get paid by the week and find that you have nothing left to pay the bills that arrive once a month, the Half Method may work for you. Write down the payments that you make once a month to establish a target goal. When your weekly paycheck arrives, take out half of the amount that each requires until it satisfies the full payment. You get a wonderful feeling of peace of mind from knowing that you can pay your bills without having any money for a whole week. It works better if you have someone who shares expenses, but you can do it by yourself if you must.
5. Letting Goals Drive Your Budget
When you set a goal to get something that you really want, it may take less effort than you imagine. A nice vacation may inspire you to avoid spending on less important things, but the goal-driven budget works only when you have no outstanding debts. The money that you can contribute to achieving a big goal may come from canceling a gym membership, bypassing the expensive coffee shops or not dining out. The method lets you enjoy the anticipation of fulfilling a dream instead of getting instant gratification by loading the expense onto a credit card. Open an account and label it VACATION, and promise yourself to make the same or greater contribution every month.
Benefiting from Budgeting
Unpleasant as they may seem at first, budgets can make your life more pleasant in many ways. The Balance points out that a budget can help you stop worrying about money. The different budgeting methods can give you one that you like and does not deprive you of the things that you truly want. When you pick one that helps you reach a goal, it puts you in control of your money. A budgeting plan gives you a powerful tool that can shape your financial future.
Sticking to a Plan
Your success in sticking to a budget may depend on knowing how much to spend on the things that you purchase. Every Dollar suggests 10 percent for saving, giving and transportation. Utilities, health, recreation, personal expenditures and miscellaneous purchases can account for up to 10 percent. You can expect food to cost up to 15 percent, housing up to 25 percent and insurance from 10 to 25 percent. You can adjust the percentages as you see how well the categories work for you.
Working with Us to Consolidate or Settle Debt
Almost everyone knows the difficulty of living on a budget, but we can help you through the rough spots. Christian Debt Counselors works with debt settlement programs that negotiate to get a lower repayment amount, and we can work with you in debt consolidation too. When you consolidate your debts, you may get to make only one payment instead of many. We understand the frustration that you face when you get behind in your bills and cannot keep up. Give us a chance to sort out the financial situation that you face. We can help when you give us a call for an appointment.