Businessman and author, Ronnie Lee, shares effectual tips and strategies to help you manage money smartly and stop living paycheck to paycheck in his book, Know Money No Problem. He discusses the basic principles of good money management and its importance. Lee describes his personal struggles, growing up in a household that survived on a single paycheck every month. As he grew older, Lee began to learn from his parents’ financial mistakes and worked on his financial growth. Hard work, dedication, and intelligence paid off for Lee. Today, he owns several businesses and a chain of homes in Las Vegas, Nevada. He lived the American dream and changed his life around that alone should serve as inspiration for readers.
Budgeting is one of the most important parts of money management. In the book, Lee discusses budgeting in details, how it can benefit your financial situation and help you save up money. What many people are unaware of are the different types of budgets that you can apply to your lifestyle. These different budgeting methods can suit your lifestyle and help you stick to keeping a budget every month. As per Marianne Hayes from MarketWatch, here are several budgeting methods that you can pick from:
· The 50/20/30 rule: Easy to remember and difficult to mess up. This system has you allocate your take-home pay like this:
o 50% for fixed expenses
o 20% for financial goals
o 30% for variable expenses
The 50/20/30 rule makes it easy to identify where you may be overspending so that you can course-correct as needed. Spending 40% of your income on variable expenses like food, for instance, is a sign that you need to dial back on eating out until you’re comfortably within 30%. Similarly, if you’re overspending on fixed expenses, it may mean “borrowing” from your flexible spending to make up the difference.
· The values-based budget: People like to do the things that make them happy. Though that may sound obvious, this interesting system operates under the assumption that unless your budget is customized to your individual priorities (i.e., making you happy), you simply won’t stick to it.
After accounting for your most important bills (rent or mortgage, utilities, food, minimum debt payments), along with your financial goals, really think about what brings you joy. This can range from charitable giving to weekly trips to the movies to daily lattes—whatever makes you happy. Prioritize your variable expenses so you can comfortably pay for those costs, and then stop spending on what doesn’t matter.
· The flexible budget: This budgeting style is easygoing, with little work required—as long as you’re good about staying consistent with your daily spending.
First, automate all your monthly fixed expenses and financial goals. Then, whatever’s left in your bank account until next payday is yours to spend, without much additional oversight. This budgeting style is designed for people who rarely overspend, as it’s the most hands-off approach.
· The zero-sum budget: At first, this budget might seem more confusing than the rest, but it’s actually one of the most practical once you try it out. The main idea here is to account for every single dollar of income before it’s even spent.
For example, if you take home $2,000 every paycheck, you’ll basically “spend” all $2,000 on paper as soon as you get paid. First, you’ll pay off your fixed expenses and financial goals. Then, you assign all the remaining income to variable expenses until you reach $0. That way, you always know where your money has to go for the month, which should help you decide if you can or cannot afford a splurge purchase.
The trick here is to actually follow your budget once you have it written down. But if you do, it takes a lot of the uncertainty and chaos out of your day-to-day financial decisions.
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