How to Choose the Right Budgeting System for You?


Posted on Tuesday 14 July 2020


Experts across the globe agree: budgeting is a great way to keep your personal finances on track from one month to the next. A solid budgeting system can ensure that your bills are paid in full and on time, that you still have money left over for the fun things in life and—with any luck—that you have enough to save for the future.

But budgeting can be tricky, especially if you are learning how to do it for the first time. How do you even start? Luckily, you don’t have to be a math whiz or accounting pro to start budgeting—and there are plenty of different approaches to match your financial health and preferences.

In the sections below, we’ll show you a few tried and true budgeting methods and help you choose the right system that works for your finances. With these budgeting tools at your fingertips, you’ll become a financial expert in no time!

Budgeting System Idea #1: Keep It Simple With Envelopes

This is perhaps the most basic way to budget—and if you’re completely new to the world of managing your personal finances, this might be a good place to start! First, you’ll need to decide how much money you have left after you pay your bills (rent, mortgage, utilities, car payments, credit card payments, etc.) and after you set money aside for savings (retirement, emergency fund, etc.).

Once you have that number of money left over after bills and savings, take a series of envelopes and start labeling them with categories that do not have a set limit each month. You’ll be making envelopes for things like:

  • Groceries
  • Entertainment
  • Restaurants
  • Bars
  • Shopping
  • Gas
  • Vacations
  • Gifts

Divide a set amount of spending cash into each envelope. Each envelope represents your spending money for each category. Once the envelopes are empty, don’t buy anything in that category until the next month.

This type of budgeting approach makes your budget tangible and accessible, and using cash also makes you much more intentional about how you are spending your money each month. But that accessibility can also be a downfall if you struggle with being disciplined about your spending—so there’s a certain level of discipline that you’ll need. After all, going over your budget can be as easy as refilling an envelope, so make sure you are prepared to say no to temptation!

Best for budgeters who:

  • Have never budgeted before
  • Don’t mind using cash for their monthly expenses (outside of recurring bills)
  • Work best with a tangible budgeting system
  • Are disciplined enough to stop spending when an envelope is empty

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Use The 50/20/30 Budgeting Rule

The 50/20/30 rule is simple: all you need to do is divide each pay cheque into three categories. 50 percent is applied to the necessities, such as your mortgage, rent, water, electric, and groceries. 20 percent is applied to savings accounts and paying off credit card debts (or any other debt you may have). Finally, 30 percent goes to entertainment, like date nights, ordering takeout, shopping, and vacations. Easy, right?

Sure, it’s straightforward enough, but there’s a bit of a catch. The 50/20/30 rule requires that you take an in-depth, detailed look at how much you are bringing in, and exactly where that money is being spent each month. You’ll need to set aside time to really dive into your monthly income and expenses—but what’s great about the 50/20/30 rule is that you can manage it in whatever way works best for you.

For example, you could create a spreadsheet and share it with your partner, and have each of you enter in your daily spending. Or, you could use a notebook to write down the dollar amount of each and every expense. And you might even want to utilize a kitchen whiteboard to keep track of your necessities, debt payments, and entertainment costs.

This approach does take some time—and you’ll have to stay on top of it each month—but there are some serious benefits to be had at the end of the budgeting tunnel!

Best for budgeters who:

  • Want to take a hands-on approach to managing their finances
  • Prefer a straightforward approach to budgeting
  • Would rather create their own tracking method for spending and saving
  • Can dedicate time and effort to staying on top of their budget every month

Get Creative with Budgeting Apps

If creating your own tracking system with the 50/20/30 rule feels overwhelming, you might want to explore budgeting apps instead. There are plenty available, and all of them will give you the ability to track your budget in real-time, with minimal hands-on effort from you. Two of the most popular budgeting apps are Mint and You Need a Budget (YNAB).

Budgeting apps sync to your bank account and organize your spending according to categories, such as Entertainment, Groceries, Restaurants, Bars, Shopping, and more. (You could even create your own customized categories, too!) To jump-start the process, you’ll have to set specific limits for spending in each category. Once your monthly limits are set, you can let the app do its work. Set up alerts to let you know how much you have left in any given category, and log in at any time to see graphs and interactive forecasts on your spending.

With a budgeting app, you can sit back and let the app software do all of the calculating and financial management for you. It’s a great way to get a holistic view of your finances—without having to put together your own spreadsheet or budgeting system.

Best for budgeters who:

  • Are tech-savvy and prefer to use software to manage their finances
  • Want to have 24/7 access to a real-time view of their financial health
  • Don’t want to do spending calculations on their own
  • Don’t mind paying a monthly fee for a budgeting app

Easy, Actionable Budgeting Steps You Can Take Today

No matter what budgeting system you choose, successfully managing your personal finances means taking a holistic approach to smart spending and saving. There are tons of easy, actionable ways that you can start boosting your budgeting power today—you just need to know where to look! Here are some of our best tips to start improving your financial health:

  • Cut back on utilities.
    Utilities are unique in that you have a ton of control over how much you are spending. Start boosting your budgeting power right at home! Even adjusting your air conditioner or furnace by a few degrees can make a big difference in your monthly bills. Cut back on your shower time to conserve water. Only turn on lights in rooms that you are in, and keep appliances unplugged unless they are in use.
  • Decrease streaming services.
    We’re all guilty of having more than one streaming service—whether it’s Netflix and Hulu, HBO and Showtime, or all of them. Cut back on your entertainment costs and free up your budget by cancelling a few of your streaming subscriptions!
  • Get a better car insurance rate.
    It’s probably been a while since you’ve shopped around for your car insurance. Get a few quotes from competing insurance companies and see if you can save by switching and getting a lower rate.
  • Consolidate your debt.
    If you find that a large portion of your monthly budget is going toward paying off debt, it might be time to consolidate. Credit cards are notorious for high interest rates, which essentially lock consumers into more debt than they initially signed up for. Consolidate your debt and decrease the money you put toward high interest fees by using promotional, interest-free balance transfers, or by taking out a short-term loan.

Budgeting might seem intimidating at first, but the key to getting over that initial hurdle is to just dive in and commit to making the effort. And understanding what budgeting system is right for you can make all the difference. Take the time to explore multiple options and choose the budgeting system that works for your own needs, preferences, and abilities. At the end of the month, you can’t afford not to have a good handle on your personal finances!

If one of your budgeting goals is to pay off existing debt, taking out a payday loan can be a great financial tool. Learn more about why My Canada Payday is one of the best payday lenders across the country by calling (604-630-4783) or emailing (getpaid@mycanadapayday.com) our industry-leading support team!