Budgeting is important—but it isn’t always easy. If you’ve tried it before, but just couldn’t stick to it, it’s time to try a new plan. There are many different ways to budget, and there is a method out there that will motivate you to stay on top of your finances and work toward your financial goals. Below are a few budget plans you could try this year.
The Weekly Budget Plan
If you’ve had trouble sticking to a budget in the past, this one may be for you. By breaking your budget down into the total amount you can spend in a week, it’s easier to decide what and what not to buy.
To start, figure out your average weekly income: take your annual net income, and divide by 52 for the weeks in a year. Next, determine the average amount you spend per week on recurring expenses like rent, insurance, loans and other bills. Subtract that from your weekly income, and you’re left with how much money you can spend on everything else per week.
From there, you will probably want to break down your budget even more. For one, determine your savings goals. If you can, put a portion of each paycheck in savings right away by setting up direct deposit. You might also want to factor in large, infrequent purchases like plane tickets so that you don’t have to find room for them later. And to make things even easier for yourself, you can break your weekly budget up into needs and wants.
The 50/30/20 Budget Plan
This budget plan has you spend 50% of your after-tax income on needs, 30% on wants, and 20% on savings and investments. This budget is great for people who don’t mind putting in some work to set a budget that they can use for a long time.
The difficult part of this plan is determining the actual cost of your needs vs. your wants. Because your needs budget should cover only the bare necessities, you’ll have to look at each bill and draw the line between what is necessary and what is a bonus. For example, instead of lumping your phone bill into your “needs” budget, determine how much you would need to spend on a basic plan and phone. If you have a pricy phone and an unlimited data plan, those costs go into the “wants” category.
The savings part of this budget plan includes not just money you put into savings accounts and certificates, but investments, retirement contributions and money put toward debt repayment, too. If you are paying more than the minimum monthly payment on a loan, the extra amount you pay also counts as savings, since you’re saving on the interest you would have accrued.
The Financial Tracker
If you’d prefer to budget without doing as much math, you could try a financial aggregator, like our recently-launched Financial Tracker. This tracker can do a lot of the heavy lifting for you while helping you stay on track to reach your goals.
Let us help
When trying out a new budget plan, keep in mind that you can always tailor it to your needs. While budgeting might be tedious at first, it will become second nature after a while. All of the effort will pay off once you start reaching your financial goals.