Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


What is Budgeting?

Budgeting is what keeps you financially stable. It is the plan to allocate funds to different areas to maintain balance. A budget keeps you aware of your financial status, avoiding living beyond your means.

Budgets are made, but at times, failure is inevitable. In this article, you will come across three true and tried budget plans that can help you a better plan.

The Envelope System

In this type of system, you must have several envelopes with you, which you label differently. Each envelope is labeled according to the use of the funds put inside, for instance: grocery or emergency. If you have recently finished school and have just got employed, it is important to have an envelope labeled student loan to ensure you keep up with the required payments.

set of black opened envelope and cash dollars
Photo by Karolina Grabowska on

At the beginning of each month, each envelope is credited with the allocated amount. This amount is used as days go by, and once an envelope runs out of cash, no more cash can be used in that given category until the following month. This keeps you on your toes as you spend money from each envelope as you know that once the money runs out, you will have to find other means to live without that particular thing, for example, trips.

This method is very effective, especially with cash, but with the advance in technology, you can now use online banking the same way. Here, you create a budget template that helps you plan your budget according to your income. This method helps you spend your money wisely as you know you have no more for that particular purpose until the next month.

The Priority System

This method will work well for you, especially if you do not have a stable source of income or work with contracts. Here, you first arrange your bills in order of priority, with the most important at the top and the least important coming last.

notes on board
Photo by Polina Zimmerman on

This ensures that the most important things are taken care of, for example, rent and school fees. Even if you might not be able to cover every bill, this method ensures that the important activities in your life are still running.

The 50-30-2- System

This system helps you understand how to divide your income to cover your bills. It states that 50% should go to expenses, 30% to leisure activities, and 20% to investments. Some people find this as the most comfortable method to follow as it also accounts for leisure activities which are essential in life.

crop anonymous financier planning budget writing numbers in notebook
Photo by Karolina Grabowska on

This is the simplest method of budgeting as it does not require you to break down your accounts into the smallest bills possible to ensure that you do not overspend anywhere.

The best part about budgeting is it gives you financial discipline, a principle that comes in handy as time goes by. Budgeting may seem complex, especially for someone who has tried and failed on several occasions, but with these three methods, life has become easier. Trying out all the three methods above and selecting one that works the best for you will save you from a financial crisis in the future.