Wondering why you would need personal budgeting strategies if you’re already on a budget? What exactly is a budgeting strategy anyway?
Okay, so you’ve learned the budgeting basics and have finally gotten yourself on a budget, but in order to reach your financial goals faster its important to also have a budgeting strategy.
The great thing about budgeting strategies is that there’s no such thing as the wrong strategy.
Only the right strategies for you. It all comes down to what your financial goals are.
For example, if your goal is to get out of debt your strategy will be very different than someone who is saving for a down payment on a home.
What you hope to accomplish with your money dictates what kind of strategy you choose for yourself. Personal budgeting strategies add direction and focus to your budget.
5 Practical Personal Budgeting Strategies
1. Pay yourself first
This is the most important rule of saving money and building wealth. This should be taken literally, better yet the process of paying yourself first should be automated.
A direct deposit equal to approximately 10% or more of your total monthly income should be taken right off the top and deposited into either a high-interest savings account or invested for an even higher return.
2. Live on cash
Obviously, in today’s world of instant debiting a cash budget doesn’t seem very practical but its a highly effective way to wipe out overspending.
Nobody expects you to pay absolutely everything in cash – only variable expenses such as transportation, food, entertainment etc.
3. Keep a daily expense journal/diary
One all important key to successful budgeting is knowing not only how much money is coming in but more importantly how much money is going out.
Keeping a log of expenditures as they happen is one surefire way to get the most accurate picture of your monthly expenses.
4. Pay high interest balances first
This strategy works best if you have alot of high interest debt. It drastically reduces the amount of interest you pay over the life of the debt.
5. Pay smallest balances first
Another debt payment strategy that will get you out of debt fast. This method was made popular by Dave Ramsey and is also known as the snowball method.
The strategy is simple, pay off smallest balances first allows and allocate more and more money toward each subsequent debt.
Personally, seeing my debts wiped out in this fashion one by one gave me a sort of psychological boost.
You may agree or disagree with me but I write what I know. And I know each of these personal budgeting strategies have worked for me at different times in the past.