Probably you have also had the feeling that you just don't know where exactly to start
with your budget and certainly don't know which budget method to use with all the options
and in the end you didn't even start creating a budget at all, right ? If this sounds familiar
to you, then I have the solution for you now. Today I'm going to show you the best budgeting
methods you should know and how exactly they work you'll learn in today's video.
And before we dive into the topic : Hello and welcome back to our channel ! And if you
are new here : We are the finance nerds and on this channel we are helping hardworking
people like you to get more out of your hard earned money by showing you how to use your
money in the most effective way. Remember to give this video a thumbs up at the end,
if you got value out of it and now let’s start Yes there really are countless budget
methods and that is also the reason why many find it difficult to create a budget. They
simply do not know where to start and especially not which method is the best for them. However,
budgeting is not about creating the perfect budget, the key is to create one in the first
place. "Done is better than perfect" applies here. You can always tweak your budget over
time based on the experience you've gained and further customize it for you. The point
of budgeting is to get an overview and control of your finances, spending less money than
you do, and saving money at the end of the month. There is no right or wrong way to budget,
you can adapt any method I present to your needs, which you really should do. And now
let's look at the 3 methods and figure out which one is right for you or which elements
fit for you so you can create the perfect budget for you.
Percentage Budgeting You've probably heard of the 80/20 budget
or 50/30/20 budget methods. We've also made a video about this, where we introduce you
to our percentage split and why it has a different approach than most. If you are interested,
we have linked the video to our method in the upper right corner.
The principle behind it is to divide your monthly income into percentage pieces. In
the 80/20 budget it is 80% spending and 20% saving and in the 50/30/20 budget it is 50%
needs, 30% wants and 20% debt payment or saving. This method is especially good for those who
really don't know where to start. There is an exact guideline for what your money should
be spent on and it is clearly divided. Of course, it has the disadvantage that everyone
is assumed to have the same money goals and that it’s not adapted to your own needs,
but here you have the freedom to adapt it exactly to you. It's about the basic idea
of clearly dividing your income into percentage pieces.
How can you start with this method? 1. divide your income in percentages into
your defined categories 2. multiply your income by the percentages
to get the exact amount of money you want to earn
3. Saving money is a priority. Pay yourself first!
4. make sure you stay within your percentage limit every month.
Zero Based Budgeting This budget method is about spending all of
your income each month, which means arriving at 0 at the end of the month.
The formula goes like this: Income - Expenses ( + savings ) = 0
The principle is simple and also has an overlap with the percentage budget method. This method
is about assigning a meaning to each penny. To do this, every month you divide your income
exactly for what purpose your money should be spent.
How do you create such a budget ? 1. calculate your complete income for the
next month 2. list all your expenses for the next month
and also how much you want to save. 3. Now you can see exactly if you spend too
much or not.
Sinking Fund Budget This budget method is excellent when it comes
to always having enough money on the side. A sinking fund is for saving money for future
expenses. By saving more and more money, you will always have money available when you
need it and protect yourself from unexpected expenses. Sinking funds are another topic
in itself, if you want us to dive deeper into it, comment with "Sinking Funds". So we will
keep it rather superficial here now. How can you create such a budget?
1. write down your net income 2. determine the amount you want to put into
each sinking fund. 3. make sure that your expenses are below
your income. To show you the principle behind the creation
of a budget again, I would like to show you the steps in general. If you want to learn
these steps in more depth, I recommend the video above right. There I go deeper into
each step, but let's leave it here with the basics.
1. make a note of your net income. 2. keep track of your expenses.
3.create a list of your goals. 4. make a strategy.
5. make the possible changes to your behavior. 6. continue to check in.
These are the basic steps to create a budget. It's important to note that no matter what
method you choose, it's about doing it. Choose a form that suits you and your needs, and
feel free to create your own method. Just choose the points that suit you from each
method and create your perfect method of creating your budget. I wish you a lot of fun with
the implementation and let me know in the comments how you create your budget from now
on! If you enjoyed the video and now want to know
more about how to take control of your finances, click on the video to the right or check out
the video description. There you will find more videos and resources to help you have
more money at the end of the month.
And remember to hit the like button if you are willing to take control of your finances.
see you in the next video.