3 Budgeting Strategies to Try

Budgeting is not unlike dieting - the basic concept behind it is pretty simple, but it's the execution where most people get tripped up. To save money, all you have to do is not spend it. How hard could it really be? This is what many of us tell ourselves when we resolve to fix our money habits, but eventually something else ends up leading us astray.

Also like dieting, there are a seemingly endless number of budget strategies. However, none of them work for everyone. With the right amount of diligence, planning and perseverance, it's possible to establish and maintain an effective budget. If you've tried some techniques before, or are wondering how to begin getting your finances in order, here are a few common strategies to try.

Subtraction budget

This may be the most basic budgeting technique, and it doesn't require much to get started. First, simply collect all of your essential expenses in a month. These include any bills, rent or mortgage payments, utilities and anything else that doesn't vary from month to month. Then, consult your paycheck to tabulate your take-home pay in a month. By subtracting total bills from take-home income, plus a little extra to add to savings, you now have a good idea of how much money you can spend on everything else. To make this easier, it may help to have a spreadsheet that can keep track of the numbers and do the math for you. Investopedia included a good guide on how to create one  of these.

The envelope method

Credit cards are a convenient tool for budget-savvy people, but they aren't for everyone. According to NerdWallet, there is a multitude of research  connecting credit card use to poor financial decisions. People who use credit cards tend to spend up to 18 percent more than if they just used cash. Impulse buying is also more common among credit card users. Without keeping track of credit spending, debt can quickly pile up and become a major hassle.

"Using a cash budget makes your spending more tangible."

This doesn't mean credit cards are inherently bad - they simply must be used carefully. But if you've had difficulty controlling credit spending in the past, the envelope budget may be worth a shot. This technique involves actually cashing your regular paycheck and sorting the money into physical categories. 

Budgeting with cash makes income tangible, which can allow some savers to get a better sense of their financial situation. You can literally see where each dollar is going, and where extra saving is needed.

Proportional budget

Effective money management is all about distinguishing what you need to spend money on, like food and shelter, from what you would like to spend it on, like that nice pair of shoes or the new cellphone. These categories can quickly become blurred, though. After all, you need to wear shoes every day, so why not spend a little extra on a pair you really like?

In the book "All Your Worth " by U.S. Senator Elizabeth Warren and her daughter Amelia Warren Tyagi, the proportional budget method is explained. This involves separating spending into wants, needs and savings, and divvying it up in a proportional way. Obviously, needs and savings take precedence over wants, but this method is great for those who want to learn how much of their money goes toward essential expenses. Often, people will spend around 50 percent of their income on their needs, 30 percent on wants, and 20 percent on savings.

To get more tips on the best ways to save and spend, talk to a professional at your local Vectra Bank.