There is one thing that always reigns true in the world of personal finance: Everyone does things differently, especially when it comes to budgeting. I’m convinced, no two budgets are the same. Here are a few of the different budgeting methods I’ve observed…
The anal envelope:
This method is no joke. It’s not for the faint of heart as it requires some serious discipline. Essentially you create a different envelope for all of your various expenses (rent, food, car, etc). After you’ve categorized your expenses, you put in a predetermined amount of cash in to each envelope every pay period. For example, if you allow $50/month for entertainment, you’d put $50 in cash in your entertainment envelope. Pretty straightforward. The hard part is not wanting to spend more than what you put in the envelope. Once you’ve spent the $50, it’s gone. No going to the ATM or using your credit card. Not even if that camera you really want is on sale. There is very little flexibility in the envelope system. Let’s just say it’s not for me.
The guess and check budget:
Ahh, this is my kind of budget. All you have to do is get out a piece of paper (or use excel) and itemize all of your monthly expenses. Instead of putting the budgeted allotments in envelopes each month, I use a guess and check method as I go about my spending. For example, if I feel like I’ve spent a lot more on dining out than I normally would, I cut back for the rest of the month and survive on PB&Js. This method is definitely more flexible than the envelope system, but it also allows for overspending if you aren’t careful. I generally stay within my allotments for each category, but every now and again I’ll get a little crazy and spend some money I probably shouldn’t have. If you don’t have some solid discipline I would not subscribe to this method.
The “WTF is a budget” budget:
Unfortunately, this is probably the most popular budgeting method in our culture. The people who use this method couldn’t spell budget, let alone live on one. They are usually broke, stupid, and stupidly broke…. but hey, at least they have 786 pairs of shoes they never wear. They don’t keep track of their money at all. They often don’t know how much they make and they definitely don’t know how much they spend. This is not a good plan. It’s financial suicide. If you’re a member of the “WTF is a budget” club, you better figure something out quick ’cause a financial disaster is brewing.
What kind of budget are you rockin’? Do you set aside a predetermined amount each month and stick to it religiously? Do you have an idea of what you’d like to spend, but don’t follow it to the “T”? How do you budget for the irregular expenses like car maintenance or haircuts? I’ve never really figured out a good way to set aside money for things that don’t occur on a monthly basis. Any budget tips, tricks, and helpful hints are always appreciated.