A big part of financial wellness, depending on what it means to different people, is making a habit of saving. Learning how to set aside money for future needs and wants can pay off (quite literally) in the long run. Keep reading for some budgeting techniques.
Unfortunately, money matters are easier said than done. Maybe you’ve found yourself wanting to start saving but not knowing how to start, or you’ve made attempts that were half-hearted and didn’t really stick.
The key to forming habits, especially finance-related ones, is being consistent. Before anything, you need to establish your financial goals—is it to reach a certain amount at the end of the year? To build funds for specific wants? Or, are you putting money aside for a rainy day? From there, you can research different budgeting techniques that align with the goals you have.
The infographic below tackles the top five budgeting techniques: the 52-Week Challenge, 50/30/20 Rule, Envelope Budget System, 6-Month Emergency Fund Rule, and the 80/20 Budget.
The 52-Week Challenge focuses on saving towards a goal amount by the end of the year. This is done by setting aside a fixed amount each week, starting in the first week of the year. The amount will depend on how much you want to have by Week 52, making it easy to commit to.
If you want to create a balance between your savings and spending, the 50/30/20 Rule will work better for you. The idea behind is to allocate 50% of your income to necessities, 30% to wants, and 20% to savings, ensuring that both your needs and wants are met, while still contributing to your savings. Plus, 30% lets you enjoy your hard-earned money without breaking the bank.
If you’re not sure where to draw the line with needs and wants, you might want to consider the 80/20 Budget. Here, you put 20% towards your savings and leave 80% for spending on anything else.
For those with multiple financial goals, like settling bills, paying off debt, and saving for a new phone or trip abroad altogether, the Envelope Budget System provides a good solution.
Start this by creating a budget for each month, creating a label for each expense or saving goal. Transfer these labels onto individual envelopes and fill them with the corresponding amount. The goal is to only spend what has been allotted for a particular envelope and avoid borrowing from the other ones.
Finally, the 6-Month Emergency Fund Rule is a more serious take on savings. With this technique, your goal is to save the equivalent of six months worth of wages and bare necessities. The only time you’ll be spending this fund is if you are in an emergency, allowing you to get through without compromising your financial status and way of life.
It may seem challenging at first, but keeping to your plan will help you get used to saving in the long run. Once you have your savings built up, you can start exploring more financial plans—insurance, investments, and the like—and begin your journey to financial literacy.