Budgeting Basics: What IS Budgeting?

If you are new to the world of personal finance, budgeting, paying off debt, or saving for your future, you probably have TONS of questions.

People in this space rave about the importance of budgeting, but what IS budgeting anyway? Why do you need a budget? What is its purpose, and what will it do for you?

A budget allows you to control your money, rather than the other way around.

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The “B” Word

Often times, the word “budget” comes with a lot of pre-conceived notions and emotions. Unfortunately, many people think of budgets as restrictive.

Let me tell you a secret: They can be the most freeing thing in the world!

Knowing that you have control over your money, and that your money is working for you, can alleviate so much stress in your life. Budgets make you more confident in your decisions about money.

Okay but what IS budgeting?

So now that we’ve established that budgets don’t have to be restrictive, let’s talk about what budgets are and what they can do for you!

For our purposes, we don’t need the technical, dry definitions of budgets that many in the finance world use.

All you need to know now is that budgeting is the process of deciding where your money is going to go. What money are you going to save? Spend? Invest? A budget answers all of these questions and more!

I prefer to think of budgeting in terms of doing something. You don’t create a budget once, and then forget it and never look back.

Successful budgets are VERBS, not NOUNS.

Now that you’ve decided to budget, you will be continuously budgeting by assigning your money a job, re-assigning, and changing your budget to make it work for YOU.

Get started budgeting with my free budgeting printables!

Types of Budgets

Now we know the basics of budgets and how awesome they can be! But what are some types of budgets? What methods are commonly used to assign money a job?

50/30/20 Method

This method consists of putting 50% of your money toward your needs, 30% toward your wants, and 20% toward savings.

This is a great budgeting method if you are just wanting an outline of how much money to put where.

I wouldn’t recommend stopping there though. Especially if you are new to budgeting, I would break those categories down a bit further to figure out what you are spending in each of those categories.

You want to know everything about your budget. The bad, good and ugly. So even if you use this as a guide, I would dive deeper!

Zero-Based Budgeting

This budget method involves assigning every single dollar in your budget a job. So once you are done budgeting your money, your expenses should equal 0.

This might sound weird, but stick with me. This is my favorite kind of budgeting method! (I still use this with the help of YNAB)!

So with the zero-based budgeting method you decide what each dollar is going to do for you. Is it going toward debt? Savings? Groceries? The cat? And how much is going toward each of those things?

I love this method because it gives all of your money a purpose. So it allows you to really decide what is important to you and where you want your money to go.

1/2 Payment Method

In my opinion the 1/2 payment method works best if you are paid biweekly.

In this case, each time you get paid, you fund half of your expenses.

So half of your rent, half of groceries, half of fun money.

That way you are never trying to fully fund a big expense with one paycheck.

I think that this is a great method to incorporate with other methods if you get paid biweekly, but I wouldn’t make it your only budgeting method.

Budget By Paycheck

When I first got started budgeting, this was my jam! And it’s also kind of what I follow now with a mix of zero-based budgeting.

Budgeting by paycheck just makes sense to me.

In this method, you make a budget every time that you get paid. So instead of budgeting monthly if you are paid weekly, you would make a weekly budget each time that you get paid.

The Budget Mom is a great resource for this! I used her when I first started budgeting.

Obviously, this is just a quick snapshot of all of these budgets. All of them are much more nuanced, and I could go on for a while about each. But if you are new to budgeting, it’s good to just get your feet wet and learn the basics about what is out there.

So Let’s Get Started

Now that you have a quick snapshot of budgeting, it’s time to decide which budget is right for you and your lifestyle!

If you want more information on budgeting basics, you can check out more here!

I can’t wait to hear all about your budgeting journey!