You want to create a budget, but the idea of listing every single expense sounds time-consuming and daunting. You’re not realistically going to track every banana that you buy; that’s just too much effort.
How can you budget in a way that’s manageable and easy? Here are three ideas.
#1: Two-category budget
The two-category budget, also called the anti-budget, is as simple as it gets: You pull your savings from the top and then spend the rest. You don’t need to worry about tracking every single purchase; you simply “pay yourself” (pay into your savings) first and foremost, and then spend the rest of the money without a shred of guilt.
This strategy hinges on the idea that you’ll automatically adjust your lifestyle, unconsciously, to fit whatever amount of money you allow yourself to keep. By tucking away your savings first, you mentally recalibrate into living on less.
#2: The three-category budget
This simple three-category strategy allows you to break up your spending into three areas: needs, wants and savings. This is similar to the two-category budget outlined above, except that instead of lumping your money into ‘savings’ and ‘spending,’ you can subdivide spending into ‘needs’ and ‘wants.’
This gives you a better idea of how much of your money is going towards discretionary costs, such as clothes, movies, fast food, restaurants, holidays and other non-necessary items. If you need to trim back your budget, this strategy helps you identify how much you’re spending on discretionary purchases so that you can make realistic adjustments.
#3: The five-category budget
This budget allows you to break up your savings into five simple categories: savings, housing, transit, bills and wants. Let’s explain:
The advantage to this budget is that you can see broadly how your money is getting spent, which means that you have an understanding of where your funds are going. At the same time, you don’t need to micro-track every small purchase that you make; you can separate your expenses into a manageable number of categories.
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