With all the technology we have at our fingertips, it has never been easier for you to track how you spend. However, according a recent study, only 41% of Americans follow a budget, or track their expenses. While you may have a system set up to manage your money, the real purpose of a budget is to help you save money. Except, many times that purpose is overlooked because people get caught up in using their budget to pay bills or in finding extra money to spend. According to a recent poll conducted by the Associated Press, 66% of Americans would struggle to pay for an emergency of over $1,000. Do you fall in that category?  If so, what is stopping you from creating a budget?

One explanation may be that you haven’t found a system you like or one that works well for you. Part of our job as your financial institution is to make sure you are making well-informed, smart decisions with your money. So we’re going to help you find a budgeting tool that is right for you!

But first, you may be curious how your spending habits compare to the average person. How similar are your habits to those in the chart?

Here are 5 budgeting methods we like.

1. Zero-Based Method

The zero-based method works best if every dollar has a purpose. It’s a pretty simple method. If you make $4,000 a month, your expenses should also add up to $4,000. Now, at a glance, this doesn’t really seem like you’re saving any money. The best way to save money using a zero-based budget would be to factor in the amount you want to save each month. Once you’ve budgeted for all of your expenses you take the amount leftover and transfer it to savings. That action will zero you out every month, and help you start to build savings.

2. 50-30-20 Method

With this method, each number represents a percentage that has a predetermined purpose. While the percentage you put in each category can be adjusted to fit your expenses, traditionally, 50% goes to needs (which would be housing, groceries, utilities, insurance etc.) 30% goes to wants (dining out, hobbies and entertainment) and the remaining 20% goes towards savings. Again, with this budgeting method the percentages are flexible. You can make your own version of the method that fits best for your lifestyle. While it is encouraged to save 20% of your income every month, your circumstances may not make that possible at this moment. So, set that as a future goal for yourself!

3. Cash-Only Method

These next 2 methods are fairly similar and could even be combined if you wanted to go that route. This method is designed to help those that are spending too much in a specific category, entertainment for example. With the cash-only method, you take the cash you are allocating for this month out of your account and set it aside. Whenever you go shopping or spend money on entertainment, instead of using your card, you should only spend the cash you have set aside. This helps you to avoid exceeding your budgeted amount. Since you haven’t overspent, you can take that excess money and set it aside in a savings account!

4. Envelope Budget Method

This method can tie methods together, or work as its own method. This envelope budget method is a way to physically split your money up. If you’re mentally strong enough to avoid overspending, you can track your cash flow your own way and make sure you don’t exceed the allotted amount. But, if you have a problem overspending, you should put your money into designated envelopes for specific purposes. When you go to the grocery store, you estimate how much you need for groceries this week and only take that amount of cash along. This method can make it much easier to save money because you don’t have extra money on hand when temptation strikes you in the checkout line.

5. Create Your Own Method

I could sit here all day and write about the different methods of budgeting. It’s hard finding a method that works best for you, so this is what I have done, personally. I’ll warn you, it took time to get set up. First, I used what I spent in previous months as a baseline. Each month I adjusted it a bit until I had set limits for myself. It has worked very well for me, but it takes patience to get it just right. Maybe you can do something similar, or perhaps you’ve been inspired to try one of the other methods we’ve mentioned. I say, go for it! Even if it’s an odd, unpopular method…if it works for you, it’s a good method.

BONUS: Budgeting Services

There are also many digitized ways to track your spending. There are apps and online services that can do most of the heavy lifting for you, but the key is that you have to be willing to use it. Regardless of what method you use, when you first create your budget you’re going to have to be willing to sit down for an extended period of time and get everything set up correctly. Once you do, it’s a minimal amount of time doing monthly maintenance and overseeing that budget to make sure you stay within your limits. And, ultimately, meeting your savings goals is worth any amount of time.

At Central National Bank, we have a digital budgeting system within online and mobile banking that is free for account holders. It is called MoneyCentral. It gives you the ability to monitor all of your accounts, whether they are with us, or another financial institution. You can learn more about MoneyCentral at https://centralnational.com/whycentral/moneycentral.asp!

People who keep track of their finances are less likely to endure a financial crisis and more likely to build up substantial wealth over time. Try out one of these methods and see if it’s right for you! We’d love to hear about your methods for budgeting as well. Leave us a comment below if you’re currently using one of these systems, or have found another method that works well.

5 Personal Budget Methods You Should Check Out
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