There’s more than one way to manage your budget. Many people assume that a budget is one of those things that’s essentially one-size-fits-all. You put as much of your cash into your savings and possible and try to make sure that you’re living within your means. However, that’s not the only option.
The traditional budget is one of the most common cash plans, and it allows you to list your income and expenses, then simply set goals for how much you want to spend in each category. The good thing about this budgetary solution is that it’s extremely flexible.
However, it’s not always the best option for people who need more structure in their lives.
Here are some alternative budgeting plans to consider if you think traditional budgeting might not be the right option for you.
The 50/30/20 Budget
The 50/30/20 budgeting plan is a simplified plan which allows you to break your expenses down into three separate categories: wants, needs, and savings. Around 50% of your income needs to go towards needs, while another 30% goes into wants and the remaining goes into the savings account you keep separate from the rest of your expenses.
If you want, you can swap the last two categories around, depending on how quickly you want to reach your savings goals. The more you invest into savings now, the faster you’ll accomplish reaching your targets for that new house or whatever you need to buy. If you don’t want to save and you’d prefer to get a loan from somewhere like Omacl.co.uk instead, then you can take the extra 10% you would put into savings, and you can spend that on the loan repayments. Just make sure that you’re not devoting more than 15% of your income to loans and debts.
The important thing to remember here is that there is a difference between wants and needs. Just because you’re spending 50% of your budget on needs, doesn’t mean you should allow yourself to go over the top on things like clothing and food because you “need” those items. You can get a good shirt for a decent price without having to spend a fortune on designer labels.
The 80/20 Budget
This is an even easier budget to manage than the one we mentioned above, because you only deal with two categories – savings, and the rest. 80% of your budget goes towards the things that you need and want to pay for, like your mortgage or rent and your council tax, as well as your phone bills and home expenses like gas and electricity. The rest of the money you make each month has to go into your savings account.
The 20% limit is the minimum for what you need to save. If you can’t put that much away towards your future and your retirement, among any other goals that you want to be prepared for, then you need to take a much closer look at the way you spend.
This is a good budgeting choice if you feel like you want to have more freedom over the wants and needs section of your payments each month. You can ensure that once you’ve put your money away towards saving, you don’t have to think too carefully about what’s a need and what’s a want.
The Sub-Savings Account Method
This is a slightly different spin on the 80/20 budget, and it means you can decide how much money you need to save by funnelling your cash into sub-savings accounts based on goals. You open various savings accounts and give each one a name based on what you want to save for. Then you can divide your savings amounts up based on how much you want to put towards each individual goal.
This could be a slightly trickier process depending on how many savings accounts your bank will actually allow you to open. If you can’t get multiple accounts yourself, then you could consider getting the money you would usually put towards savings out of the bank every month and dividing it into different savings jars. However, it’s important to ensure that you have a save place to store those jars – just in case.
Remember, with the sub-savings account method, you can also make things a little easier by using apps on your phone to track where your money is going. Most banks will offer these apps as standard these days. However, you don’t have to use tech unless you feel comfortable with it.