Six Types of Budgets and the Six Categories You'll Find In Each
Six Types of Budgets
Time-based Budget: This tracks expenses that need to be allocated within a specific time frame. These can be weekly, monthly, yearly.
Cash-only Budget: This is also known as the Envelope system. With a Cash only budget, you allot a certain amount of cash to yourself and that is all you use. No debit or credit cards, no checks.
Bare Bones Budget: This type of budget only allocates money to basic necessities. This budget is great for those who are trying to pay off debt or recently lost a job.
Irregular Income Budget: This type of budget is for freelancers, entrepreneurs, or those without a fixed income. This type of budget is based on starting from the least amount of money made in the month to set a baseline.
The Debt-Free Budget: This budget focuses on eliminating debt. This goes hand in hand with the bare bone budget meaning you pay for all of your necessities and use the rest of your money towards eliminating debt.
The Savings First Budget: This budget is based on paying your future self first. This money goes into your savings and then you pay the rest of your bills. This type of budget only works if you have enough money for both.
Six Categories You Need In Your Budget
Housing
This is your mortgage or rent. As a general rule, this should not be more than 30% of your take-home income.
Transportation
This is your car payment. If you do not have a need for a vehicle, then this is the cost of your fare for a bus or train. Other items you should include are the cost of parking and rideshares.
Living Expenses
These are necessary to maintain a basic standard of living. Think groceries, cell phone bills, internet costs, and clothing.
Savings
The first savings account you should have is an emergency fund of $1000. Then you begin to save for down payments, investments, vacations, and other bigger expenses.
Debt
This is every form of debt that is not included in your housing or transportation. Debt includes student loans, credit card debt, medical debt, personal loans, and payday loans.
Recreational Expenses
These are expenses that are not necessary. Examples include movies, restaurants, and vacations.