The cost of living crisis has many of us more careful with our spending habits. The surge in food and energy prices has forced us to make lifestyle changes and review our finances. But starting or improving your budget is not as daunting as you might think. Let’s explore three unique budgeting strategies than you can try to manage and grow your money better.
Reverse Budget
Sometimes called the pay-yourself-first budget, this approach involves first setting up your savings goals – e.g. you want to set aside £200 a month for retirement, £100 towards a holiday, and £100 for a new car. Then, whatever money is left can be used for anything you like.
The benefit of this method is that you prioritise your future self, first. The added bonus is the freedom you feel to spend the remaining money extravagantly without feeling guilty that you’re slowing down progress towards your goals.
To make this work best, we recommend automating the savings process. E.g. you can set up a direct debit (or if you work for a Select Partner Employer of ETA you can use Payroll Saving), each month after you receive your wages to move money into separate accounts for each financial goal you have. This removes it from your current account before you have the temptation to be naughty and spend it.
Zero-Based Budget
If you’re very detail-oriented then this may be your favourite method for budgeting. At the end of the month, all income minus expenditures should equal zero; there should be no money left over in your account. Essentially, all your spending is accounted for down the last penny as it’s been assigned a specific purpose.
For this to work, you should probably have predictable fixed income and be acutely aware of your transactions each month. But there’s no denying that spreadsheet-lovers and those who like to feel in control of their life, find this way very appealing.
The Bucket Budget
Also referred to as the 50/30/20 budget. If you’re new to budgeting then, unlike the Zero-Based Budget, this approach is more straightforward and doesn’t involve meticulously tracking all your expenses.
First, break down your expenses into three categories:
- Necessary expenses (50%)
- Discretionary expenses (30%)
- Savings and debt payments (20%)
The percentages are adaptable, for example, if you have a lot of debt then you’ll want to allocate more than 20% towards debt repayments and less towards discretionary expenses. So tailor the concept to your individual needs.
To make this work, you’ll need to have a clear understanding of the difference between wants and needs. And let’s not kid yourself, those fancy new shoes you’re eyeing up definitely don’t belong in the Necessary Expenses bucket, despite you feeling like you’ll die if you don’t buy them right this second.
So give these unique budgeting strategies a try and see what works best for you. Whichever method you decide on, you’ll need a way to track your expenses efficiently. That’s why we recommend you start by using MoneyHelper’s free online Budget Planner Tool. This will shine a light on your current situation so you’re better informed for choosing the right budgeting approach and on the right path to building financial resilience. And when you’re ready, open a savings account with EuroTrust Credit Access to put your new budgeting strategy into practice!
