Budgeting methods, a summary

Budgeting Methods

November 11, 2020
Budgeting, Money Management, Saving

To achieve your financial goals, having a budget is a must. There are many budgeting methods, even if you don’t think you have a “method” we’re sure there is someone who can classify it somehow. Some methods are not so beneficial and others can potentially be life changing. Let’s have a look at some of the different methods.

Budgeting methods that work

The reason these methods work is that they’re not reactive, but are proactive and intentional. Using them consistently will help you gain financial control, clarity and get back to growth. You can even largely automate many of these methods using CoinCoach, register below to be notified when we launch.

Six Simple Rules Method

Our Choice

1. Allocate all funds
This simple rule helps you begin to get out of any debt you may have.

2. Plan for unexpected expenses
This rule will help you protect yourself from events that have historically blown your budget.

3. Improvise, Adapt, Overcome
With this rule you will increase your budgets ability to remain flexible, reducing the chances of breaking your budget.

4. Pay from the past
Getting ahead by one month or more allows you to use old money when paying. This rule helps you break the cycle of living pay cheque to pay cheque.

5. Goals for the future (savings, investments, rewards)
Once stability and growth is achieved via rules 1-4, rule 5 will help you to think ahead, begin planning and achieve your financial life goals.

6. Reward yourself
This is our favourite rule, however there is a reason it’s the final rule. This rule will help motivate you through 1-5 for and help make you want to keep repeating the process.

Using these six simple rules of budgeting will help you gain control of your money, reach your goals and reduce money related stress. It worked for us, and it can work for you, too.

If you’d like to get rid of financial stress by automating these six simple rules, or any of the methods here, register below to receive a notification when we launch our app. It’s free and always will be.

Click the button below to learn more about this budgeting method and how it can help you!

"Using the six simple rules helped me to recover from tough times and get back to growth"

Morgan Kidd

Founder & CEO

50/20/30 Rule

Sometimes written as the 50.20/30 and also known as the balanced money technique, this rule is extremely popular because it has worked for many people.

This rule works in the following way:

50% Needs: Your needs consist of the things you 100% need to live and definitely have to pay, regardless of what happens. Examples include mortgage payments, rent, utilities, groceries, insurance and tax.

20% Goals: We all have financial goals and this 20% would be allocated toward yours. Whether you’re aiming to pay off debt (excluding your mortgage), put money into investments or increase your savings, this is the money that should be allocated to these goals.

30% Wants: This expenditure is the type you can live without, however, it would make life more enjoyable. Eating out, cinema and partying should be paid for out of this 30%.

We’ll have more articles coming soon to elaborate on this method. Follow us below to stay up to date

The Envelope Method

Using cash is a great way to stick to budgets. According to numerous studies, you’re statistically more likely to spend 50% less when using cash instead of credit/debit cards. If you’re struggling with spending, using cash and this method can be extremely helpful.

Traditionally with this method you would use actual envelopes, however, with CoinCoach you can add cash transactions and assign them to budgets/envelopes in order to keep track and still gain insight.

This method works by you setting aside a fixed amount of cash for different categories and putting it into envelopes… and when the cash is gone, it’s gone.

This is a great short-term method for when you’re reining in debt and/or credit card spending, but is normally not a long term solution.

We’ll have more articles coming soon to elaborate on this method. Follow us below to stay up to date

Zero Based Budgeting

This method is essentially just Rule 1 of the Six Simple Rules Method. That said, it’s still a popular method on its own for a reason, it works for many people.

As in Rule 1, with zero based budgeting you’ll need to allocate all your funds. This means you give every penny/cent a job. This doesn’t mean you should spend everything, it means quite the opposite. You could, for example, allocate money to savings, tax, rent, utilities, groceries, eating out, partying, healthcare etc. After you’ve allocated every penny/cent you’ll have zero left to budget.

Fun Fact: Our founder used this method to great effect when he first started his budgeting journey.

We’ll have more articles coming soon to elaborate on this method. Follow us below to stay up to date

Traditional Budgeting

This method is old but gold as it has stood the test of time for many people.

It’s simple to start this method, even with a pen and paper if required:

Step 1: Total all your expenses, this can be done manually, copying and pasting from your statements or easily by linking your accounts in CoinCoach.

Step 2: Total your income after taxes.

Step 3: Simply subtract Step 1 from Step 2.

If the number you’re left with is negative, you should proceed with caution as you’re spending more than you’re earning, which is dangerous and unsustainable territory.

If, however, the number you’re left is positive then this will be the amount you have available to play with. This amount could be put towards anything you want. If your goal is to reduce your debt, use it for that. If your goal is to take you family on a holiday, it can also go towards that.

You can always take a deeper dive into your finances should you wish to optimise further. You can also create limits for each category to help you keep within your spending limits and much more. However, it can be a lot of time consuming manual work and it would be more efficient to automate it.

If you would like to do that, we’d recommend registering for CoinCoach below or read more About Us and the features we’ll be creating.