Budgeting Strategies



Getting gift money is probably very exciting for you. The feel of the papery material under your hand as your mind starts turning to all the possible things you can buy. Perhaps a PS4, or some Sephora makeup.


But receiving money doesn’t mean you should spend it right away. Right now, as most teens are minors, you probably don’t have many expenses and can probably spend as much money as you want/have.


But a good habit to have is budgeting. According to one of Bankrate’s polls, in 2019 nearly 38% of Americans did not have a budget and were just trying to pay off bills on time. Budgeting is a financial technique that can set you for life.


Types of Budgeting:


The five main budgeting strategies are the traditional budgeting method, the 50/30/20 budgeting method, the 80/20 budgeting method, the zero-sum (or zero-based) budgeting method, and the sub-savings accounts budgeting method.


Traditional Method:


The traditional budgeting method is used traditionally. You can list out your stream(s) of income and different expenses then find the difference. Afterwards, you set goals on how much you want to spend on certain categories in the future.


50/30/20 Method:


This is a popular method for budgeting. This method tells you to divide your income (or any money you receive), spend 50% towards needs, spend 30% towards wants, and spend 20% towards savings. Some broader expense categories may be in between need and want, so it might be easier to list out specific items instead.


80/20 Method:


This method is very simple. How it works is that 20% of your income money is put into savings, with 10-15% of that 20% as retirement savings and the rest as a cushion for unexpected financial crises. The 80% is money you can use for anything else and spend it however you like. This method is popular as it allows you to “pay yourself first” by putting money into your savings and investment accounts. It can also be adjusted by how much you want to save or spend.


Zero-sum Method:


The zero-sum method is a bit more complicated than the former two methods. The goal of this method is to make every dollar you have work for you. To use it, you have to use last month’s income for this month. That means that you need money beforehand. The point of this method is putting all earned money towards expenses, savings, and investing. All your money must be spent somewhere. A benefit of this method is that it is ideal for careful spending.


Sub-Savings Accounts Method:


This method requires opening multiple savings accounts and labeling each after a specific goal like “2021 Tesla Model S.” Then you set up an end amount that you want each account to reach, and calculate based on your earnings how much money you can put in each account each month to reach your end goals.


Other:


There are definitely other ways to budget. For example, you don’t have to create a budget from scratch and can instead use online apps, some of which are free.


As a teen, budgeting may not seem necessary right now but will be extremely useful in the future. And, starting early can never hurt. Some methods may work better than others for you now, and other methods may work better in the future.


Written by Allie Chang



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