Understanding Types Of Budget

Understanding Types Of Budget

Every person should include budgeting in their life to have a good control on personal finance. If you keep aside some time for it, the benefits one receives from it is huge as it would streamline all the expenses incurred and helps in achieving your financial goal easily and quickly. Similarly, having a trading plan while you indulge in trading is also important for you to earn a profit.  You need to choose good trading software that can help you in putting the trading plan into action.

There are various strategies one can adopt for budgeting. The strategies help in making the budgeting more easily.  Every individual is different. Hence, one type of strategy might work for a person while some other strategy would work for another. Understanding the different strategies will help you in determining the budgeting strategy that would work best for you considering your personal situation.

Different types of strategies

50/30/20 type of budget- It helps in determining how much one can spend in different categories. It would help in focusing more on the financial goals.  Out of the total income earned, fifty percent should be spent on personal priority needs such as basic food, housing, transportation costs, etc.  The next thirty percent of the income should be spent on your wants like eating out, movies, entertainment, etc. The final twenty percent would be spent on things like your goals such as retirement or buying the house.

Envelope budget- In this type of budgeting, you assign money that could be spent on each category.  For each month you withdraw the cash and put in different envelopes that are labeled for each category.  Whenever the money gets over in each category you should ideally stop spending. It is ideal for people who are not good at tracking the expenses.

Zero dollar budget- For this type of budget, you need to plan the entire spending for each month to the last dollar. It helps to plan the expense effectively and gives a good control over the spending. It helps in monitoring the budget regularly.

Five- category budget- According to this budget, five categories are set up and it determines the percentage of income one will spend on each category. You need to allocate a percentage of the income to each category while you make the budget plan and ensure that you stick to it all the time.

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