How to Choose a Personal Budgeting Method

By Sharon Cook | Mountain America Credit Union

 

The holiday season has arrived! I love this time of year. But it always seems to catch me off guard—I’m just barely over the excitement of my granddaughter starting back to school and the next thing I know, it’s time to start planning for Thanksgiving. That means it’s also time to do an annual review of my finances—starting with my budget.

 

There are so many budgeting strategies. How do you decide on the best method?

   

That really depends on your number one financial goal—is it paying down debt, kicking poor spending habits, saving for a significant purchase or something else? Here are some tips to choose the right strategy:

 

1. Take stock of your current financial status and priorities.

   Evaluate whether your current situation lines up with your future goals. Outline some adjustments you can make to fit your needs.
    

2. Decide what you’re willing to do.

   As you develop your budget, consider your commitment level. Some budgets will require you track every purchase, others may only require a weekly or monthly check-in.
    

3. Take a digital or manual approach.

   There are a variety of apps and programs to automate your saving and spending goals. Or, you may prefer a more hands-on approach with a spreadsheet or handwritten list.
    

4. Choose a budget that matches your financial goals.

   • The envelope method—Want to curb your spending but not excited about tracking every dollar? Set spending limits by category (clothing, entertainment and groceries). Fill your envelopes (digital or physical) with the allotted amount and, once empty, wait until the next paycheck to replenish the envelope.
      

   • The 50/30/20 method—Care for your needs and wants while putting away a little each month to pay off debt. Split your monthly income as follows: 50% to necessities, 30% to wants and 20% to debt repayment and savings.
      

   • The zero-based method—Assign a job for every dollar in your budget. Set aside money each month for groceries, bills, vacation fund, debt, etc. until you reach a zero balance. This budget helps you develop an intentional spending plan.
      

   • Pay yourself first—Also called a “reverse budget,” contribute to your savings and investments first, then pay bills and purchase necessities with whatever is left. With this method, you decide how much to set aside for savings, debt repayment and other necessary expenses.

 

Whichever method you choose, remember that you can achieve your financial goals with a little planning and discipline.

     

Sharon Cook is a wife, a mother and Senior Vice President of Marketing and Financial Education at Mountain America Credit Union, where she oversees the marketing, social and web departments. She has dedicated her life to helping people make smart decisions—whether financial, professional or personal. “It’s why I love all of my roles,” says Sharon.