Looking to save more this year? You'll need a budget. Check out these 3 budgeting strategies & watch your savings grow!
The Spending Fast
Exactly as its name implies, a spending fast involves eliminating nearly all outflow of money. While basic necessities like housing, food, utilities, and gas are allowed, "extras" like eating out, going to the movies, most clothes shopping, and gift purchases are not. This method was popularized by Anna Newell Jones, who documented her journey in the book The Spenders Guide to Debt-Free Living. This is an extreme method for those who want to get out of debt or save a large amount ASAP.
This method is for those who are great at holding themselves accountable. Can you stick to a diet? Easily reach goals you set for yourself? You'll do well with this method.
The Envelope Method
This might seem like an old fashioned method of budgeting, but its simplicity has helped people to successfully budget for decades. While you'll probably still want to use your checking account to pay your bills online, with the envelope method you'll withdraw cash and divide it into envelopes that are designated for specific categories like eating out, clothing, or fuel. You can also use the envelope method for big spending goals like a vacation, an engagement ring, or a renovation. The idea is that once you've spent all the money you've budgeted, it's very clear that you've run out of funds. For example, if you've budgeted $250 for groceries, you'll take that envelope to the store with you (leaving the others behind). When you run out of cash in that envelope, you'll need to get creative with the food that you have on hand. Be careful to store your cash in a secured place, like a safe.
The envelope method is for those who consistently overspend in certain areas or aren't sure where their money is going every month.
The Subtraction Method
With this method, you'll plan out your spending for the pay period ahead of time. Each time you make a purchase, you'll log it so that you know how much you have left in each category. YNAB (You Need a Budget) is one software that helps people "give every dollar a job" ahead of time and then automates the tracking of expenses. The method is also helpful for those who want to make saving a priority, since it makes clear what's left for other expenses once the amount to be put toward savings is removed.
By choosing where each dollar goes and closely tracking spending, this method is helpful for those who feel out of control in their relationship with money.