Effective budgeting strategies to spend wisely
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6 Effective Budgeting Strategies To Spend Wisely

Trying to stay on top of your finances can be quite a challenge when selecting the best method or strategy that works best for you. In fact, several people consider budgeting such a rigorous and challenging task because they often aren’t using the right budgeting strategy for them. Budgeting is more than simply listing out expenses and how much they may cost. There are several strategies involved in budgeting, and knowing them would enable you to select the best choice for you.

What is a budgeting strategy?

A budgeting strategy is a conscious, calculative approach to manage your funds. Several people use budgeting strategies to ensure they don’t exceed their monthly income without meeting their necessities. This is why often, a  budget is considered restrictive and used when you have limited funds. However, budgeting strategies enable you to reach your financial goals, manage resources, track your expenses and cultivate a savings habit. 

Budgeting strategies aren’t limited to individuals; in fact, companies use them to manage their funds and ensure all departments within the organization have their needs met while having enough resources to invest in future opportunities and expand.

Effective budgeting Strategies 

Many people are familiar with the traditional budgeting method, which involves making a list of your weekly and monthly expenses and how much they cost. After subtracting the cost of their expenses for the week or month from their income, the remaining funds can either be channelled to their savings or used for other miscellaneous expenses. Yet, this method isn’t practical and sustainable for everyone. 

It is important to know other budgeting methods that have proven effective for millions across the world. These budgeting strategies include: 

1. The 50/30/20 Budget Method

This strategy proves effective in managing your finances, however, doesn’t offer much information on details on exactly what your money is going into making it hard to keep track of your expenses. For instance, you know 50% of your income is going into settling bills but then you don’t know how much you spend on gas, electricity, and transportation in a month. However, it proves very effective for persons who want to budget and save without going into many details.

2. Zero-based Budget

The Zero budget is known to be effective for people who want to keep track of their expenses and wish to ensure that every dime from their budget is properly dedicated to meet a need. It is effective for savings and staying in control of your finances to get out of debt by being calculative. The Zero budget ensures that you don’t exceed your income while ensuring you get the best value for your money.

The zero-budget is designed such that every dime is assigned to a certain budget category such as bills, savings, debt payments. The zero budget requires that you spend each month creating a detailed list of your expenses even wants such as going to a game. It accounts for your debts, savings, and investments. The idea is that once you assigned each penny in your account to an item all that should be left is zero. This helps minimize impulsive spending and although some may consider it restrictive it has proven effective for beginners who are new to budgeting.

Here is an example of a Zero-based budget for an individual with a $1000 income.

Rent- $300

Groceries - $100

Utility bills (Gas, internet, electricity)- $80

Student loans -$125

Transportation- $50

Eating out- $75

Clothing- $60

Savings- $210

Remaining balance: $0

With a zero-based budget, all expenses and debts are met to the best of your satisfaction and your wants are met as well while securing enough for savings and investments. 

3. The Envelope Method

It may sound outdated especially in a modern world that promotes the cashless policy but has proven effective in reducing bad spending habits. Once you have spent all the funds for gaming or eating out then you understand that you are done with spending on that category to the next budgeting period. It trains your mind to be more cautious with spending money understanding that you can’t access more funds till the next month.

However, if an urgent need arises you can borrow from another category. It has proven effective for parents trying to teach their children healthy saving habits.  However, the spending limits might prove too difficult for people to maintain thus prompting them to continuously borrow from other categories invalidating the budgeting strategy. Also, people who are unfamiliar with using cash for each expense might find the process tasking. An alternative might be to use budgeting apps designed like enveloping budgeting method to help you ease the process without having to withdraw your funds in cash.

4. Value-Based Budget

The value-based budget focuses more on you rather than the numbers in your budget. It understands that you have wants and things you desire and believes you deserve to enjoy your money. It focuses on spending money on what you consider important. It helps you categorize your spending according to what you consider valuable. In this budgeting system, you allocate funds to meet the necessities; rent, groceries, utility bills. However, it is up to you to decide how you spend the rest of your money. The focus is then to spend money on what makes you happy like a new mobile phone, a dine-out at an expensive restaurant, or VIP tickets at a concert. It is highly personalized and focusing on meeting your needs while ensuring you get to enjoy and spoil yourself a bit with your income. It may also be considered as pay yourself first budget which ensures that you sort out all your monthly expenses first with your income. You can then decide what you with the rest of the money.

This budgeting strategy may not encourage savings and it is only effective for persons who are frugal, disciplined and have already cultivated a savings habit. It may also may it difficult to keep track of what you spend your money on. However, it is effective for people who prefer no restrains and are keen on meeting their monthly expenses while maintaining their lifestyle.

5. The 60% Solution

The 60% formula is similar in structure to the 50/30/20 budgeting strategy but offers more flexibility. The budgeting strategy recognizes how tiresome budgeting can be and aims to achieve your financial goals while still providing you with some comfort. It involves allocating 60% of your income to what is termed committed expenses which centre on food, rent, debts, clothing, medical bills among other necessities. All your bills, even certain wants like expensive Cable TV, fall into this category. The 60% covers all the bills you have to pay every month. 

The remaining 40% is then divided into four categories; long-term savings, short-term savings, retirement savings, and fun money with each category taking 10% of your income. An alternative for persons who have their retirement savings deducted directly from their gross is to use these funds for investments. Long-term savings cover emergency funds and funds you wish to accumulate over the years. Short-term savings are saved in a separate account and are saved up for use within a year. The remaining funds in this category at the end of the year can be added to your long-term savings. It is usually to cover up a short-term goal such as the purchase of a new car or house. Fun money covers all other expenses like gaming, eating out, purchase of collectibles among other wants. 

This budgeting strategy is proven most effective when it is automated. It is effective for building long-term financial growth and stability. 

6. The ‘No’ Budget

This budgeting strategy is quite effective for persons who have already cultivated a savings habit. It involves reviewing previous months’ expenditures to ascertain how much is spent on bills and necessities over the month and when they are due. It is often most effective when automated. The goal is to ensure that you don’t spend more than you make. Once, you have reviewed your expenses and ascertained that what you spent the past months hasn’t surpassed what you make you can proceed with this budget. 

Once you have met your necessities and saved what you consider necessary you can spend the rest of the funds on what you deem fit. This budget strategy doesn’t have much structure and may prove ineffective for persons who don’t have a healthy savings habit and makes it difficult to track expenses. However, it offers flexibility for persons keen on no restrictions in budgeting.


Budgeting is an effective tool used in ensuring that you get the best value for your hard-earned money. With the right budgeting strategy in place, you can spend money comfortably without worrying about overspending and going into debt while cultivating a healthy saving habit. With the right budgeting strategy, you would be able to meet your investment goals and attain financial growth and stability. 

However, it is important that you aren’t mimic another person’s budget but being true to yourself when selecting a budgeting technique to attain the best result. You can attempt the different types of budgeting techniques to find out which suits you best.  With the right budgeting technique financial freedom is within the grasp of your hands. 

Disclaimer: This article is meant to provide general guidance and understanding of cryptocurrency and the Blockchain network. It’s not an exhaustive list and should not be taken as financial advice. Yellow Card Academy is not responsible for your investment decisions.

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