When it comes to achieving long-term financial stability, it’s important to remember that it doesn’t always depend on your income. In fact, it’s more often about how you manage your money.
As a result, one of the most important aspects of financial stability is having the right budgeting techniques in place. This includes allocating your financial resources wisely and ensuring that every pound is accounted for.
However, we all know how overwhelming financial management can be. Combined with an uncertain economic environment, it can be difficult to find the energy and motivation to sit down and work it out.
We’re here to tell you that it may not be as overwhelming as it may seem.
Regardless of whether you’re starting to think about saving up for a mortgage deposit,looking to save a nest egg, or simply want to take control of your finances, we have budgeting techniques for you.
In this blog, we’ll discover the top 4 budgeting techniques that will help you gain greater control over your finances, reduce financial stress and achieve stability.
1. Zero-Based Budgeting
Don’t worry, it’s not as complicated as it sounds. The Zero-based budgeting technique simply encourages you to account for and allocate every pound of your income to expenses, savings and debt repayments.
The practice is all about budgeting from a “zero base” every month, which means your expenses and incomes start at zero. This allows you to use a specific month’s income for only the same month’s expenses.
Anything that’s extra goes towards your savings and debt repayments, and then you start again from scratch in the next month. This is particularly effective for people who are looking to improve their saving habits effectively.
2. The 50/30/20 Rule
A very simple rule used by many across the world, the 50/30/20 rule relates to how you structure your income across all aspects of your life. These aspects are Needs, Wants and Savings. Although not something you can often put into practice in your life right away, even a small step in the right
direction can make a big difference.
The rule aims for you to allocate 50% of your income towards your needs, like rent, utilities and groceries. This ensures your essentials are accounted for.
Next, 30% of your income is put against wants such as entertainment, dining out and other non-essentials.
Then finally, you should aim to put 20% of your income into savings or debt repayment, helping you move towards becoming debt-free whilst also building up an emergency fund.
Although it’s not suitable for everyone and will take some time to get going, this budgeting technique aims to achieve a balance towards improving your financial health, without compromising on the things you enjoy.
3. Envelope System
The Envelope System is a more traditional budgeting technique that involves dividing your money into labelled envelopes. Each envelope has a spending category (such as dining out, debt repayment, groceries etc) on it and the cash allocated to that envelope is only meant to be used for that purpose.
Whereas traditionally this may have been worked out with actual envelopes and money, with most transactions now carried out online - think of each envelope digitally instead.
Once the money in the specific envelope is spent, that spending category is paused until the next month begins. This gives you a much more strategic breakdown of where your money is going and what part of your expenses consumes the most money.
Whilst similar to the 50/30/20 technique, the extra detail helps understand and tackle any overspending habits, by limiting your expenses to specific categories.
4. Automated Savings
One of the best budgeting tips for families is automated savings. With so many expenses and so many demands to look out for, families often struggle to save their money, not least because it can be so time consuming to manage.
By setting up automated transfers to your savings account at the start of every month, you can start to build a strong emergency fund. Slowly, over a period of time, you can divide these savings into emergency funds, retirement planning and other financial goals.
Another method some online banks offer to start saving is spending “rounding”, where expenses are rounded to the nearest pound, and the difference is added to a savings account. This is a great way to save “little and often” to start building that nest egg.
This also eliminates any temptation to overspend, as the money is no longer easily accessible in your main account.
Choose Salad Money for Fair and Affordable Loans
Now that you know all about the top budgeting techniques for financial stability, it’s time to start using them. Although budgeting and changing spending habits isn’t easy, simple budgeting tips can make a huge difference to your future and give you peace of mind.
However, we understand that life is not always smooth sailing for everyone. With the ongoing economic conditions across the world, financial emergencies can strike at any moment. This becomes even more difficult when you find yourself at a lack of financial resources.
With Salad Money, you can rest assured that, regardless of your financial situation, we’re always here for you.
As one of the leading lenders in the UK, we are dedicated to providing you with the personal loans you need, despite a less-than-perfect credit score. This becomes possible with the help of our unique loan affordability system that provides us with a more accurate analysis of your financial situation.
What’s more, we are regulated and authorised by the Financial Conduct Authority (FCA), so you know that your financial data is safe and secure.
To learn more about our personal loans, click here and to read more blogs like this one, visit our blog page now!
