Recent apps, books, and templates use one of three budgeting methods: automatic, zero-based, and proportional.
- Proportional budgeting allocates (sorts) your money into just three different categories (buckets, or jars) based on some preset percentages. The most popular in 2019 is 50/30/20 rule, from the book "All Your Worth" by Elizabeth Warren and Amelia Warren Tyagi. In this plan, 50% goes into must-haves, 30% is your wants, and 20% is your savings (including paying down debt). Proportional budgeting is a great introduction to budgeting. It teaches you how to adjust along your priorites.
- Automatic budgeting allocates all fixed (static, not changing) expenses on payday automatically, so you don't even see it. The Pay Yourself First budget includes retirement savings in the mix. Because you don't see the money, you don't spend the money. It is the best way to build your savings.
- Zero-based budgets promoted by minimal lifestyles and FIRE (Financial Independence Retire Early) are all the rage currently. The evergreen best-seller Your Money or Your Life by Vicki Robin & Joe Dominguez started this movement. Another variant, the Envelope Method, uses cash and is supported by Dave Ramsey in his book The Total Money Makeover. The YNAB app and their book have helped many. Every dollar earned is allocated into categories at the beginning of the month. Every expense is tracked. If you want to get out of debt, this is the budgeting method for you. It will curb your spending.
Which is Best? (Hint: you can combine methods)
All budgeting methods fail to deliver on their promises. No matter how much effort, skill, or time invested, budgeting success is pushing a rock up a very steep slope.
They are blind to the nuances of your situation. Even if you read all the books, the results are varied. Willpower becomes fatigued, and then your brain sabotages your best efforts. I speak from deep personal experience.
And yet, all budgeting methods are useful. They help all of us to focus on a specific problem area we want to improve.
If one method speaks to you and you are motivated to overcome the hurdles, then start there. Click on a link, read more about the book, and check it out from the library. Try the software.
If your budget has already failed you or you're burnt out, then it's time to learn about how to combine budgeting methods and behavioral psychology to change your life.
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