May 23, 2025

Budgeting Basics

☑ LMY VERIFIED

Money affects each one of us. Think of a budget as a blueprint for your money – it gives your money purpose. Budgets, also known as spending plans, are not the same for everyone. Some common ones include:

• The 50/30/20 rule is where 50% of income goes to needs, 30% is for wants, and 20% is for savings/debt repayment.
• Envelope budgeting is where you only use cash for weekly expenses. At least 20% of income should still be allocated to savings, however, other expenses should be planned in the form of cash payments.
• 80/20 budgeting is where you put 20% toward savings and then you’re free to spend the other 80% however you want.
• The reverse budget is where you build your savings goals within your budget before expenses.

 

Try any budgeting method for at least 30 days before switching to another method; It takes at least 21 days to establish a new habit. Consistency is a huge part of success. However, getting to the point of consistency is not always an easy task. Taking the first step is oftentimes harder than maintaining a well-established routine. How can we overcome our fear? Use your resources!

 

Financial resources available to you, like family, friends, work, or your community, are some of the best ways to get over the fear associated with taking control of your money. Automation for credit monitoring and savings can help you get over the manual need for building consistency. Habit stacking, attaching a new habit to a consistent one, is another great method for establishing a new money move.

 

An emergency fund should be part of every budget (within that 20% of savings). On average, emergency funds are 3-6 months of living expenses set aside in the case of an unplanned event. Emergency funds are safety nets – they give you peace of mind so you can focus on your other financial goals, knowing that your savings momentum won’t be disrupted should something unexpected come up.

 

Ultimately, budgeting puts you in control of your finances. The best budget is the one you stick to. It’s not about restricting every dollar; It’s about giving every dollar a job. If you don’t have a budget already, get started NOW!

• Visit our Financial Learning Center here.
• Download our mobile app here.
• Learn more about coaching here.

 

 Featuring Varinder Singh, Jeannette Castro, and Shannon Evans |  Edited by: Dani Buschick 

 

Not subscribed to our newsletter?