Have you ever wondered why some people seem to effortlessly manage their finances while others struggle to stay on top of things? The answer often lies in how they budget. Taking an approach to budgeting that’s best suited to your personality can be the key to achieving your financial goals.
Read more: How Ally Bank’s buckets and boosters can help get your budget on track
Take the budgeting quiz
Ready to uncover your budgeting style? Take our quiz and discover your own unique approach.
Procedural budgeter
In life and in finances, you thrive knowing you have a plan. Implementing and sticking to a structured, proactive budgeting method can help you set clear goals, track progress and know exactly where your money is going.
50/30/20 method
Often hailed as an easy-to-follow system, the 50/30/20 method divides your income into three broad categories: needs, wants and savings/debt. This approach allocates 50% of your spending to necessities like rent or mortgage, utilities, groceries and transportation. The next 30% is reserved for personal non-essential items like entertainment and hobbies. The remaining 20% is dedicated to savings and debt repayment. This method provides a simple framework for maintaining a balanced financial life while emphasizing the importance of saving.
Tip: Organize and separate your savings goals using Ally Bank Savings Account savings buckets.
Line-item budget
If the 50/30/20 method isn't detailed enough for you, a line-item budget may be the way to go. This system allows you to create a comprehensive list of all your income sources and expenses, breaking them down into individual line items. Each expense is accounted for separately and offers a clear picture of where your money is going.
Tip: Ally Bank Spending Account’s buckets tool can help you track and budget expenses directly in your account—and find additional opportunities to save extra cash.
Hands-on budgeter
As a visual person, you like knowing where your money is going and how you’re tracking toward your goal. Choose a budgeting tool that allows you to see clear visual progress to help understand how much you’re spending and saving each month.
Digital buckets
Divide your monthly income into different digital “envelopes” with a simple tool like Ally Bank's spending buckets. Each bucket can represent a specific spending category like groceries, utilities or entertainment, without the need for multiple accounts (or physical envelopes of cash). Allocating a predetermined amount into each bucket at the beginning of the month can help curb overspending. You can create up to 30 different buckets within one Ally Bank Spending Account.
Goal-driven budgeter
As an ambitious person, you’re likely more motivated to budget when it’s directly connected to tangible outcomes. If that’s the case, design your budget for your goals, not just to track spending.
Zero-sum
Whether you’re saving for a down payment or your child’s education, the zero-sum budgeting allows you to distribute your earnings to various categories or expenses, leaving no surplus funds unassigned. The primary objective is to make sure that your total income minus your total expenses equals zero, creating a balanced budget.
To implement zero-sum budgeting, establish spending limits for each category to help you control your expenditures and avoid overspending. If you find yourself with leftover money at the end of the month, make sure to allocate it intentionally. Consider options like adding to your emergency fund, paying down your debt or rolling it over into the following month's budget for future expenses.
Achieving financial balance
There's no one-size-fits-all approach when it comes to your budgeting style. They're tailored to your individual financial objectives and personal preferences. Your goals and inclinations will play a significant role in shaping your budgeting style, ensuring it aligns perfectly with your path to financial success.
