We’ve discussed the concept of budgeting many times in past blog posts, and for good reason. The ability to budget responsibly AND follow through with that budget is a lifelong skill that separates those who manage money well and those always wishing they had more. According to The Millionaire Next Door by Thomas J. Stanley and William D. Danko, budgeting is one thing that sets the wealthy apart from the rest of us — 55% of millionaires keep a budget.

Taking the time to budget can mean more money in your
account and less stress over finances.

There are many different ways to budget and to stick to your budget, so the question becomes “Which budget is right for me?”  Let’s take a look at a few very different budgeting methods to see which one best fits your lifestyle.

Zero-Based Budget

In this type of budget, the money you take in and money you spend should equal out to zero. It’s simple to do: draw a line down the middle of sheet of paper. On the left, write down all your income (job earnings, income from a side job, child support, etc.). On the right, write down all of your expenses. Don’t forget to “pay yourself” in expenses by putting a set amount into savings.  If it doesn’t equal zero, adjust your spending until it does.

Three-Step Budget

This budget is simple in concept and effective if you follow it:

1. Destroy all your credit cards.
2. Invest 20% of all that you earn. (And never touch it.)
3. Live on the remaining 80%, no matter what.

There are a number of budget methods similar to this where your spending is broken down into percentages with some allocation to investing or savings.  If this concept seems like it may fit your lifestyle, you may also want to take a look at the 60% Budget or the Balanced Money Formula. 

The Cash Only Budget

This budget operates on the psychological principle that physically handing over cash as opposed to swiping a card will help you save. It has been shown that using just cash makes people rethink their purchases. Some drawbacks of this budget are that it forces you to carry a good amount of cash with you everywhere you go, it can be hassle trying to get the right amount of cash every week from your bank, and you miss out on the opportunity to earn rewards on your debit and credit purchases.

Really, any budget comes down to this: are you bringing in more than you’re spending? You can create your own budget keeping this principle in mind, and don’t forget to pay yourself first! Lincoln Savings Bank’s Budget Plus Personal Financial Management tool can help you break down your budget to see where you can spend less. If you have any other questions, you can always call your nearest LSBbranch for help!