Why is budgeting so difficult for so many people? Many people assume there is only one way of budgeting which is mainly giving up things that make you happy because you are on a budget. In reality, nothing could be farther from the truth. There are many ways to save money. Let’s tackle this dilemma on how to budget with the same logic as dieting, there is no one-size-fits all. Budgeting systems are designed to help you understand and evaluate your relationship with money. While all share a common goal, they often use distinct tactics to get you there. If one doesn’t work for you there surely is another one that will. 

The Balanced Money Formula

Some people stick to the 50/30/20 rule — a good starting point that can be altered to fit your lifestyle. The general rule is to spend no more than 50% needs , 30% on wants, then save the remaining  20% . 

• Needs are housing, utilities, health care, transportation,  insurance, and basic groceries and basic clothing. 
• Savings includes retirement accounts, emergency savings, and  debt repayment.
• Wants are everything else: cable TV, cell phones, haircuts,  swimming lessons, charity, books and  magazines, vacations, and food and clothing beyond the basics.
  

Kakeibo method

Kakeibo was invented in 1904 by Hani Motoko, Japan’s first female journalist. Kakeibo gets its name from a Japanese term meaning “household financial ledger” because it is an accounting system originally designed for housewives—but it can be adapted and used by almost anyone. Essentially a kakeibo is a physical budgeting journal. Users answer some financial questions and set savings goals. Then they track their expenses, put their purchases in categories, and review expenses at the end of every month.

More importantly, kakeibo is designed to help you think about your relationship to money and understand why you’re making each purchase. When you can spend hundreds of dollars by clicking a few buttons on Amazon, this can be a nice reminder to slow down.The simple system asks users to answer four questions:

1. How much money do you have available?
2. How much would you like to save?
3. How much are you spending?
4. How can you improve?
   

The 60%  Solution

60% of your income is used for “committed expenses.” These include your mortgage, food, basic clothing, car payments, insurance, etc.

Where this differs from the “needs” category of the Balanced Money Formula is that literally ALL your bills are included in this category, including such wants as cable TV or your expensive cell phone plan.

The remaining 40% of your income is divided into four categories with 10% allocated to each category:

• Retirement
• Long-Term Savings
• Short-Term Savings
• Fun Money

Cash only budgeting

Also, called “Envelope Budgeting,” Cash-Only Budgeting is where you use actual cash to use as your spending money. What you do is allocate your money to your separate categories and then withdraw cash out from your bank account. You then put the cash in envelopes labeled to match your categories. This might sound very outdated but this method can still be very effective. Especially because you can leave your cards at home. Only thing to watch out for is online shopping.

Value Based Budget

This method relies on quite a bit of soul-searching and self-discovery because the “values” in the name are your values. The hook of this method—which still involves tracking your spending—is to spend money based on your values rather than worrying about how much you are spending in specific categories. For this method, you’ll want to write down what you’re allowing yourself to spend your money on based on what you value.

A budget is a plan for every dollar you have. It’s not magic, but it represents more financial freedom and a life with much less stress. Try out the different methods and see which one fits you best!