Types of Budgets: What Is Your Budgeting Style?

Budgeting sucks. No one really wants to do it. It’s hard to stick with, it’s a chore to review it every month and it makes you feel like crap when you spend way too much on lattes. But, you’re an adult so you need to do it. There are a few types of budgets, which one is right for you?  We’re getting back to basics of budgeting. Both Thomas and Andrew have been off the rails with their own budgets so get ready for some confessions. They will discuss different types of budgets, how they work and which ones are the least painful. Reverse Budgeting This budgeting method focuses on savings goals. Instead of setting up budget categories to look at your spending, create savings goals and whatever is left you have to spend. Start allocating money at the top of your priority list and work your way down. Pay yourself first. Retirement, savings, and emergency fund are put aside first. Next are fixed expenses such as mortgage/rent, utilities, car payment, etc. Third are non-fixed expenses. Anything that can fluctuate from month to month, such as groceries and gas. After that comes debt payments. Anything that is left over can be used for fun stuff like eating out, travel, fancy coffee or whatever else you like to treat yourself with. Balanced Money Formula You may have heard the balanced money formula also called the 50-30-20 rule. It’s a budget framework outlined by Elizabeth Warren and Amelia Warren in their book All Your Worth: The Ultimate Lifetime Money Plan. It is a very simple type of budgets. Fifty percent of your take-home pay goes towards fixed expenses and necessities like food, housing, utilities and ideally all this should be should be kept at 35%. Thirty percent of your take-home can be spent on wants like eating out, treating yourself to a new dress, electronics, etc. The last twenty percent goes right into retirement accounts, savings and emergency funds. The Envelope System Ah, the good old envelope system. This was a great way to keep your budget and savings goals in check before budget managem