Have you ever found yourself unsure of where all your income went? Is it difficult to keep track of all the expenses that you have? Budgeting can help you manage your money and help you save. It is the practice of tracking your income and expenses regularly. It can be done daily, weekly, or monthly.
There are many ways you can budget, and you can try the ones that will work best for you!
Zero-Based Budgeting
What?
You will give every single dollar of your income a purpose. This means that your income will exactly match the total expenses and savings you put away.
An example
If you receive 100 dollars in income, you will assign:
- 50 dollars for your remittances
- 20 dollars for your groceries
- 10 dollars for your other expenses
- 10 dollars for your savings
- 10 dollars to spend on yourself
There should be no dollar remaining once you have assigned every single dollar a purpose. Thus, it is called Zero-Based Budgeting.
Who is this best for?
For people who want to be fully in control of their money
What should you consider?
This way of budgeting requires more time to plan and track your money closely. You will have to frequently record your income and expenses for this budgeting to be effective.
Envelope System
What?
Similar to zero-based budgeting, this is putting away physical cash into separate envelopes. Each envelope is assigned a different category of expenses.
An example
If you receive 100 dollars in income, you will withdraw your money and put it in a separate envelope such as:
- 50 dollars for your remittances
- 20 dollars for your groceries
- 10 dollars for your other expenses
- 10 dollars for your savings
- 10 dollars to spend on yourself
Who is this best for?
For people who may overspend when they use cards or people who like being able to physically see where their money goes.
What should you consider?
This way of budgeting is less common due to the effects of the COVID-19 pandemic, where most places do not accept cash. This budgeting is risky as you can potentially lose or misplace your cash. Using only cash will also mean that you have less transaction evidence for banks to look at when you apply for loans.
50-30-20 Budgeting
What?
This way of budgeting assigns your income into three groups based on percentages:
- 50% of your income to your needs or essential expenses
- 30% of your income to your wants/non-essential expenses
- 20% of your income to your savings
An example
If you receive 100 dollars in income, you will allocate your income as:
- 50 dollars to your needs (100 dollars x 50%)
- 30 dollars to your wants (100 dollars x 30%)
- 20 dollars to your savings (100 dollars x 20%)
Who is this best for?
For people who like to keep their budget simple but still track their money into categories.
What should you consider?
This way of budgeting may make it easy to lose track of your spending within each category. For example, under your needs, you may overspend on grocery but not have enough money for fuel. You should consider having a buffer or over-estimate your expenses to make room for any unexpected expenses.
“No Budget” Budget
What?
This budgeting only requires you to monitor your bank balance and making sure it is not zero or has enough to pay what you need to. This is the complete opposite of zero-based budgeting and envelope system because you do not assign your money to any categories.
An example
If you receive 100 dollars in your bank account and you know you will have 80 dollars to pay for at the end of the month, you just have to make sure you have at least 80 in your bank account on that date. You can spend any amount as long as you have the money you need on the payment date.
Who is this best for?
For people who may not really enjoy or have time to closely monitor their income and expenses.
What should you consider?
This way of budgeting may lead to over-spending. It is recommended to have an ‘emergency fund’ to make sure you have enough money when you really need it.
Those are just 4 of the many ways you can budget your money. Saver Middle East has made it even easier for you by making a Budget Calculator free and easy to use—either via the Saver Middle East app or our website. Why not try one of the budgeting ways using our Budget Calculator to save time and money today?
Happy Saving!
Written by Malorie Anne Manaois