Do You Have a Spending Plan? 3 Budgeting Strategies to Try

Do you know what you want your money to accomplish? Lack of planning is one of the major reasons that credit card and other types of debt are so prevalent. If you want to take back control of your finances, you need to have some sort of budgeting strategy.

One type of strategy doesn’t work for everyone, though. Here are 3 different budgeting strategies you can try. Choose which is most likely to work for you.

1. Traditional Budget

A more traditional budget is a great starting place for many. With a traditional budget, you add up all of your income, and you add up all of your expenses. You track your spending, assigning your purchases to various categories, and you look for patterns.

With a traditional budget, you set aside a certain amount of money for each category, and then keep your spending in each category under that mark. Any left over funds can be used to build an emergency fund, or to pay down debt, or for some other purpose.

The point of a traditional budget is to get a handle on where your money is going, and then set targets for your spending. You are supposed to keep your spending under the target amount for the month. You can re-adjust for the next month if you need to.

2. Zero-Based Budgeting

Lately, Dave Ramsey has made the concept of zero-based budgeting popular. The idea behind this type of budget is to give every dollar a job. You allocate all of your money at the begin of the month, rather than just setting caps on your spending in each category. For each pay period, you list out how much you will earn, and where that money will go.

With zero-based budgeting, the idea is to end each month at $0. With this budgeting technique, you include money that you put into savings, or toward other goals. You also allocate “fun” money. And, if you want a little flexibility to be spontaneous, you plan for some “splurge” money. The idea is that you know where every dollar is going, and what it is meant to accomplish.

3. Prioritized Spending Plan

This is actually the approach I take. My husband and I both have variable incomes, so zero-based budgeting is a little more difficult for us, since we can’t say, for certain, exactly how much we will make in a given pay period. Additionally, we aren’t fans of the spending caps imposed by traditional budgeting. Instead, we take a prioritized approach to our spending plan.

We have decided what items are most important to us each month. These are items that must be funded, from retirement account contributions to groceries to bills to extracurricular activities for our son. We make sure the most important items are funded first (usually through automated means). Then, once our priorities are taken care of, we spend on whatever we want until the money’s gone.

We track our spending to make sure that we don’t overrun our income, and we use rewards credit cards for the cash back advantages. This plan gives us a little more freedom than the other two to make changes, and to live our preferred lifestyle. However, it’s not a plan for those who are struggling with debt. When we were paying off debt, we used a more traditional budget.

Carefully think about your current financial situation, and decide what type of spending plan or budget is most likely to work for you.