Why is it so hard to budget your money?
Is a single source of income not enough to cover your monthly expenses?
But, I’m receiving a salary increase.
Plus, I get promoted at work.
Also, I’m cutting down on unnecessary expenses.
Okay, I just got another source of income!
However, budgeting finances is still a headache.
Little did I know, I had already incurred various debts.
Oh, so hard to budget!!Â
Can you relate? I bet you’re saying yes to all the questions and scenarios above. Or just nodding your head as you read through the lines.
Now, get yourself ready as I’ll be revealing the easy-to-follow budgeting methods based on my learning and experiences. This is for you to use because budgeting finances shouldn’t be that complicated.
Game? Let’s jump in!!
Easy-to-Follow Budgeting Methods for Everyone
Most probably you are seeking the simplest way to budget your finances, right? Like even a person who hates computation or numbers can understand the method. Of course, it can save time and effort to analyze the whole overview of your finances. Without further ado, below are the easiest options that you can start with.
Budget Categories
For this budgeting method, you simply categorize your all expenses or obligations into needs, wants, and savings. Doing so will help you be mindful of where your income goes. Also, as you categorize your budget, you can pinpoint unnecessary expenses you incurred from last month and be able to avoid them for the succeeding monthly budget you’re going to make.
Furthermore, you can be specific in your budget categorization. This will help you to specifically minimize irrelevant expenses. For instance in purchases, sometimes (maybe most of the time which I can resonate with) you tend to buy things that you’re not intending to buy. Thus, categorizing your budget in a specific manner helps to point out such unimportant purchases.
Below budget categories with specifics are your guide.
Needs - housing rent, utilities, transportation, groceries, healthcare
Wants - entertainment, shopping budget, personal care
Savings - emergency, travel, business venture
Remember to allocate a specific amount of your income to each category based on your financial goals and priorities.
2. Percentage Budget Rule
This is the simplest budgeting method where you allocate a certain percentage to the basic three (3) budget categories mentioned above. Actually, it's the popular 50/30/20 budget rule which I renamed because I added a portion for tithes and offerings. I firmly believe everything we have is the Lord’s and He deserves the best we can give back to Him. So, the percentage budget rule is what I call the 50/25/15/10 budget rule. Let’s say, for needs 50%, wants 25%, savings 15%, and tithes 10%. Well, you can make your version of allocating the said percentage budget rule based on your preferences.
3. Monthly Budgeting (Budget vs. Actual)
Personally, I recommend doing a monthly budget so that you can monitor the flow of your finances and compare such budget allocation to your actual outflow. From there, you can already stop what is causing you to overspend. Plus, it can be avoided for the succeeding budget allocation.
Now, you might be thinking doing this monthly budget is tedious or complicated. Maybe technically it is, because of figures and computations that aren’t your interest in the first place. Nevertheless, you can make it more doable and easy for you. It’s a matter of being intentional about keeping your finances more purposeful.
How to Budget and Stay Out of Debt?
Improper budgeting can lead to debts. Real talk because I’ve been there and it’s terrifying to see how your debts surpass the income you’ve been earning every month. For instance, you spend something not on your budget list. Then, you do it again for the next month. Unknowingly, you’re already incurring debts of spending more than what you should spend for a particular month. Thus, allow me to share the simplest ways to stay out of debt while budgeting wisely.
Track Expenses in Detail
One way to budget and stay out of debt is to track your expenses in detail. Tracking your expenses is monitoring your cash flow even the smallest expenses you’ll have. You might do it in the form of a spreadsheet or find an expense tracker app which most probably a lot of it can be found online. You just have to pick the most doable for you. In addition, detailed expense tracking helps you spot overspend expense items and lets you be mindful in your next budgeting schedule. So, make it a habit to track your expenses in a more detailed way. And you’ll see how it contributes to staying out of debt. By the way, this tip is an alignment action with your budgeting routines because from this tracking you can already see your actual expenses to be counterchecked from your monthly budget.
2. Create a Debt Repayment Plan
For your debts to minimize or much better to stop, have a repayment plan for it. The most popular debt repayment plans are debt snowball and debt avalanche. Have you heard it before? Or maybe you are using it now to pay your debts. Feel free to share your thoughts in the comment section.
Going back to what I'm saying about debt repayment plans, according to research…….Â
In debt snowball, you can start paying off the smallest debts while making minimum payments on other debts. Let’s say you start paying debt number 1 while making gradual payments for debt number 2. So, when debt number 1 is done, you can move to the other and so on.
For debt avalanche, on the other hand, it focuses on paying debts with the highest interest rates. Once done, same with debt snowball, you can move on to the next highest interest rates and so on.Â
3. Look for Opportunities to Reduce Expenses
Another way to be free from debts is to find alternatives on how you can cut expenses. By this, you can focus on repaying your debts until such time when all your debts are already paid. The keyword here in realizing a debt-free life is to cut back expenses or be disciplined enough to follow what’s your budget for a particular expense.
For example, in my case, when I saw that my wants covered quite a high percentage from my finance overview, I did a little bit of checking into the details. There I found out credit card bill transactions were a lot which I eventually exceeded on the budget set for it. Literally, I overspent on purchases through my credit card. So, to prevent unwise spending, later on, I froze my credit card. Like, stop using it for a while until outstanding balances must be settled.
Final Thoughts on Budgeting Methods for a Debt-Free Future
Budgeting can be the crucial thing in personal finance because every step towards financial freedom and success starts with budgeting which includes planning on what to spend or where income goes. Even single professionals like me have a hard time budgeting because it seems there are a lot of bills and obligations to pay. However, monthly expenses shouldn’t be an excuse for not being able to budget wisely because it takes self-discipline to budget smartly. Personally speaking, I got to see how you can be resourceful in creating your budgeting techniques. Note that you can use budgeting methods for a debt-free future based on your financial goals, lifestyle, and preferences. Don’t forget to track your progress because the key to debt reduction is consistency.
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