The term budgeting can be a turn-off to so many people. This is because this word means self-limitation to some people, and no one wishes to limit themselves when it comes to spending their money. However, understanding the various budget types can help you know why it is essential to have a budget for your money.
If you think the term budgeting is too dull, you can sugar-coat it by referring to it as a spending plan. Planning for your money is an essential component if you wish to build a vast portfolio of wealth. Understanding budgeting tips will go a long way in helping you secure the kind of life you want for you as well as those you love.
To be able to implement a budget successfully, you need to understand which one among the various budget types works for you. Below are the different budget types that one can choose from:
Budget types #1: Time-based budget
This is a type of budget that one can track within a given time frame. The various time frames referred here include daily, weekly, monthly, yearly, etc. time-based budgets are easy to come around, and if you do not prepare yourself early for them, they may catch up on you.
A weekly budget is suitable for those people who receive their payment on a weekly or every two weeks basis. Basic things such as eating outs, groceries, gas or anything that can be covered within the week should be categorized in the weekly budget. A weekly budget will help you keep the money for those things you buy on a weekly basis.
The most common type of budget is monthly. This is because, every month, you have to settle similar bills such as rent, gas among others. If you want to easily track your monthly expenditure, then you should prepare your monthly budget at the beginning of the month.
A yearly/annual budget will help you understand your spending habits. This is important as you will be able to identify those periods of the year when you spend more money and thus be able to regulate such situations.
Budget types #2: Cash-only budget
Cash-only budget is important to help you get back on track. This type of budget requires that you only use cash or debit card to settle your bills. The cash-only budget is essential for those people who are spending too much on worthless things. It can help you reign in on those expenses that are not important.
Budget types #3: The bare bones
This is a budget for your necessities such as food clothing, shelter, and transport. The bare bones budget will help you survive even when you are facing an emergency such as job loss, death or something else.
Most people like keeping their essential expenses at 50% so that in the event of an emergency, they can easily cope with the little money they will be having.
Budget types #4: Special events budget
If you are planning special; events like quitting your job, purchasing a new house, wedding and such things, then you need a special events budget.
This budget consists of things that will not be necessary on a regular basis. For example, you can choose to marry only ones, and thus having a one-time wedding budget will be fine.
Unlike other types of budgets, the special events budget needs time to plan. Usually, it is for long-term plans, and thus you need to be careful when budgeting for your long-term projects.
Budget types #5: Irregular income budget
Dealing with irregular income can be a terrible thing for so many people. This is irrespective of the kind of job you are doing, whether full-time or part-time such as freelancing. With an irregular income, balancing the money you receive for your expenses can be tough.
To be able to pay your bills such as taxes even when your income is irregular, you should set up a budget that will address all your regular expenses.
Budget types #6: Cash flow budget
If you are a business person, evaluating your Cash flow is essential. It will help you be able to prepare a cash flow budget relating to all your expenses in your business.
This kind of budget is necessary to you as a business owner as you will be able to monitor and track how your business is using the money. At the end of the day, after settling all the business bills, you can be able to pay yourself a reasonable salary.
In conclusion, understanding the various budget types is essential if you plan on becoming rich in future. You need to be able to know how to categorize your expenses and prepare for them well in advance. It has always been said that failing to plan is planning to fail. That is why it is better you understand all the budget types available.