5 Budgeting Methods To Boost Financial Discipline

I have to admit that I am hostile to the term, “Budget.” The word signifies limitations as if I will have to change my lifestyle.

Only one out of three (32%) people prepare a monthly budget, and those making at least $75,000 a year are likely to do so. Why do people not want to do a detailed budget?

There are many benefits to having a budget at any income bracket. Even if you were to inherit $100,000 tomorrow, you need to understand how to deploy this money best.

A budget can help you. You just need to find the best budget method that works for you. We discuss five different budget methods below.

Traditional or Line-Item Budget

This budget is a personal income statement for an individual or household. It is similar to the zero-based budget but a bit simpler. It totals net income from multiple sources minus total estimated expenses equal plus or minus amount.

The Zero-Based budget originates from a business concept where every expense needs justification by a project’s need. This method is number-crunching heaven for those who need more structure in their budget.

Zero-Based Budget or Every Dollar Budget

This system entails placing exact amounts of cash into envelopes for each monthly expenditure you make, including your fixed costs. Putting money in jars or socks can substitute for envelopes, but I don’t think you want to walk with that.

The Envelope (or Cash Diet) System

This budget strategy to pay yourself first aligns well with a lifelong principle of personal finance. It is a reverse budget because, unlike other methods, you are saving before paying your bills.

“Pay Yourself First” or Reverse Budget

Swipe Up To Read More