Types of Budgets - What to Expect When You Start Planning Your finances

When you hear the word “budget” your first thoughts probably aren’t good. After all, what’s a budget got to do with financial planning? Unfortunately, the truth is that a budget can be a scary prospect for many people. After all, how can you possibly know if you’re spending money on the things that are worth spending money on and how to you even start making budgeting decisions?

The good news is that there are many different types of budgets and each has their own unique set of considerations. It’s important to understand that there are many different types of budgets and that not all of them will be the same for the same person. What you budget for, how you allocate your money, and how you budget will all depend on many different factors. So, to help you get a better idea of what’s involved when you start planning your finances, here is a brief run down.

 

What is a Budget, Anyway?

A budget is a plan that helps you stay on track with your finances. It’s not meant to be permanent and it’s not meant to be rigid. Instead, a budget is a plan that helps you stay focused on what you have control over and inspired to make changes if necessary. While a budget is a great way to start planning your finances, it’s important to understand that there are many different types of budgets and that not all of them will be the same for the same person. What you budget for, how you allocate your money, and how you budget will all depend on many different factors.

 

How to use a budget

Budgeting can be a very helpful tool if used properly. First, you need to decide on how much money you want to budget for each month. Next, you need to decide on how much to budget for your monthly expenses and job-related expenses (i.e. healthcare, taxes, mortgage, car repair). Once you have these parts of your budget in place, you can start to plan your money well in advance. This will help you stay on track and avoid overspending.

 

Why you should have a budget

If you’re like many people, you don’t start budgeting until your first year of university. Even then, most people only start to budget after they start working or have children. After that, most people’s budget gets progressively less accurate. Why should you have a budget, anyway? Having a budget can be very helpful if you’re like many people and don’t know how to account for money. It’s important to remember that a budget is a tool and that you should use it correctly. A budget should be treated as if it were a money tree — make sure you only take out what you need and don’t overspend.

 

The requirements for a valid budget

First, a budget needs to be realistic. The budget needs to account for all of your expenses, not just the things that you have control over (i.e. rent, food, gas, transportation, education, etc.). A budget that’s too restrictive would be hard to follow. Additionally, a budget must account for contingencies. For example, if you’re not sure how you’ll pay your rent or if you accidentally burn your house down, you need to be able to cover the costs related to that incident. A budget can never be 100% accurate — that’s why it’s called a budget!

 

The challenges of budgeting

Budgets are a challenge. The first challenge is that you have to know what expenses to control. For example, healthcare and taxes are probably two of the most difficult expenses to budget for. Fortunately, healthcare is one of the most covered expenses on your insurance so it’s something you can estimate for. Similarly, taxes are something you can estimate for but they can definitely be challenging to predict.

 

How to make budgeting decisions

Another challenge with budgets is making sure that the numbers add up. This is usually easy to do when you keep track of your spending but it’s important to remember that money is not growable so you need to budget for what you need to have access to in the future.

 

The 3 primary types of budgets

There are many different types of budgets and all have their own specific set of considerations. Here are some of the most common types of budgets: Expenses only - This is the most common type of budget and the one that most people are familiar with. It just covers expenses and doesn’t account for income or savings. Contingency - This budget allows for expenses that are out of your control like an emergency room visit or car repair. Assets only - This budget is all about the money you have and doesn’t require you to account for any liabilities.

 

The 3 most common types of financial goals

There are many different types of budgets and many different reasons why someone might choose one of the following as their financial goal: Pay off a debt - This may seem like a no-brainer but the truth is that many people don’t have a clear understanding of how much money they have on hand to cover unexpected expenses and how they’re supposed to pay off their debt. Maximize your retirement savings - This is another common reason people start their budget. They want to make sure they have enough money saved to cover their retirement, preferably in case something unexpected happens. Build a emergency fund - This is the money you put away before bills come due and can help you cover the cost of living during times of crisis.

 

The benefits of having a budget

Having a budget can be very beneficial if you stick to it. Here are some of the benefits of keeping a budget: Helps you identify spending issues and address them upfront. Keeps you from making bad financial decisions. Helps you stay accountable for your spending. Saves you time and energy from having to track your spending and make changes when you know there is room for improvement.

 

Final Words

A budget is a plan that helps you stay on track with your finances. It's not meant to be permanent and it's not meant to be rigid. Instead, a budget is a plan that helps you stay focused on what you have control over and inspired to make changes if necessary. While a budget is a great way to start planning your finances, it's important to understand that there are many different types of budgets and that not all of them will be the same for the same person. What you budget for, how you allocate your money, and how you budget will all depend on many different factors.

Date
2022-05-11