When it comes to budgeting, one size does not fit all. A detailed budget will help you control every expense. But if you tend to overspend in just one or two categories, you may not need an elaborate budget. Here are five different types of budgets, one of which is right for you:
A Comprehensive Budget.
If money is tight and you want to cut back on your spending, you will need a detailed budget that keeps track of everything you spend, and you’ll want to monitor your spending against these budget categories frequently.
A Problem-Solving Budget.
If you have trouble controlling money in just a few categories, such as clothing or entertainment, create a finely detailed budget for just these categories. For example, keeping track of clothing expenses for each member of the family by clothing type may help you pinpoint trouble areas.
A Planning Budget.
If you want to save for particular goals, add budget categories to your spending plan that create pockets of savings to meet your objectives. Monitor your progress and adjust your savings as needed.
An Overall Budget.
Perhaps you merely need a system for monitoring your overall spending from year to year. A budget with broad categories will help you monitor your spending habits so that your expenses stay under control as your income rises.
A Cost-Saving Budget.
If saving more money year after year is your goal, analyze your past expenses, then create a budget that reduces your expenditures in each category gradually. For example, if your family vacations usually cost $5,000 per year, cut that figure to $4,000 for the coming year and $3,000 the year after that.
Excerpted from the bestselling book, It’s More Than Money — It’s Your Life by Candace Bahr, CEA, CDFA and Ginita Wall, CPA, CFP