Creating a budget is necessary in order to maintain financial freedom and live well within your means. If you don’t have a budget, how would you know what ‘within your means’ really is?
There are so many different ways to budget and each person needs to budget in a way that works best for them.
One thing to think about is whether you will use Forward or Reverse Budgeting. Reverse Budgeting is where you determine your savings goal for a future date and plan your savings based on that goal. Each paycheck, you put aside the money for savings first and then divvy up the rest for other expenses. Forward Budgeting or the Forward Roll is where you use projections to estimate your savings at a future date and you roll your extra money into savings at the end of the month.
Another aspect of budgeting is the budgeting system. There are many different types of budgeting systems, but to keep it simple, there is a Cash System and a Digital System. The cash system is exactly as it sounds. All in cash. No cards, no accounts, just cash. The digital system similarly is all in savings accounts and credit/debit accounts that are primarily accessed digitally.
With either direction or system, there are many different tools that you can use to support your budgeting plan. Some tools include the envelope system, the paper system, computer spreadsheets, and computer apps and programs.
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