Our previous article explained how to create a personal budget which is an extremely important tool to have in your financial planning toolbox.

However, knowing how to create a budget is not enough. What makes your budgeting efforts successful is your ongoing efforts to incorporate strategies that encourage good spending, saving and overall budgeting habits.

Budgeting Techniques and Strategies

So, you have followed our steps on how to create a personal budget, but you are unsure of how to actually implement a saving strategy which works for you.

Below are three of the most popular types of budgeting strategies.

The Envelope System

Although many people feel like this is an outdated strategy, it can be extremely effective, especially for those who receive cash as payment.

With the envelope system, you put your cash into separate envelopes which are allocated to each category in your budget. The amount of cash in each envelope is enough to cover each expense per month. Once the money in the envelope runs out, you know there is no more to spend on that category.

This approach is particularly useful when it comes to spending money on non-essentials such eating out or buying take away coffee on a daily basis – we can see how quickly money disappears when we spend it on things we could essentially do without.

The Rule of 50/30/20

This is easily one of the most popular budgeting strategies out there. The 50/30/20 method involves breaking your spending down into three large categories: essentials, non-essentials, and savings.

Once you have done this, you allocate your money in the following way:

• 50% of your money is spent on essentials
• 30% of your money is spent on non-essentials
• 20% of your money is used for savings

Zero-Based Budgeting

Most budgets are based on an estimate of how much you will be earning every month while zero-based budgeting uses the income you earned the previous month to pay for everything you need in the current month.

This budgeting method is based on the idea that every single Rand gets a particular role and at the end of the month, you will be left with zero.

Olemera – Financial Advisors in Johannesburg

We are a team of experienced financial planners in Johannesburg, and we are here to help you with your personal financial planning.

As part of our services, we help you create a budget as well as develop and implement the right budgeting strategy for you and your unique circumstances.

If you would like more information about our financial planning services that are available to anyone in South Africa, please don’t hesitate to contact us.