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The Secret to Realistic Budgeting

Blog Post
2 min read

Cooler temperatures, harvest festivals, and bonfires signal one thing – it’s fall y’all!

It’s time to replace the lightweight tank tops of summer for cozy long-sleeves and take in the season’s brisk air and colorful hues. After packing away your warm weather wardrobe, consider sprucing up your budget. Many people struggle with creating a financial plan that leaves room for things they love – like a pumpkin spiced latte on the way to work.

If creating and sticking to a spending plan is harder than bobbing for apples, you might be missing the secret ingredient - flexibility. Read on to discover how three popular budgeting methods can help you achieve your financial goals while enjoying a few splurges along the way.

Explore Different Budgeting Methods

A spending plan that works for your finances isn’t necessarily the one your family and friends use. The right one for you is the one you’ll stick with long term. Explore different budgeting styles by committing to a 60-day trial run for each budgeting method to see which suits you best. Test driving a few options is often the easiest way to determine which one matches your personality, lifestyle, and goals.

1. 50/30/20 Budget

Separate your income into three buckets.

  • Bucket 1 contains your needs (e.g., housing, groceries, etc.) and 50% of your income.
  • Bucket 2 holds your wants (e.g., entertainment, latest tech, etc.) and 30% of your income.
  • Bucket 3 is for savings and debt reduction goals. The remaining 20% should be used for things that improve your financial stability, such as building a six-month emergency savings fund, increasing your retirement account contributions, or paying off credit card balances.

Although it’s often the go-to budgeting method for beginners, the 50/30/20 budget can be challenging for those struggling to make ends meet.

2. 80/20 Budget

Similar to the 50/30/20 budget, the 80/20 system focuses on needs, wants, and savings. However, this method requires that you prioritize savings by setting aside 20% for savings, investments, and debt payments first, then using the remaining 80% to cover needs and wants as you see fit.

If you have irregular income or expenses, the 80/20 budget could offer a stress-free way to live within your means.

3. Zero-based Budget

Unlike the other two methods, the zero-based budget’s goal is to ensure every dollar of your income has a specific destination before you receive it. When setting up this budget, get to “zero” by subtracting your income from your expenses. This requires that you know your regular expenses, plan for irregular expenses, and have the discipline to set money aside for unexpected costs.

A zero-based budget can be more time intensive if your expenses change each month. The upside of the zero-based budget is that you reduce the likelihood of overspending while including an occasional treat.

Budget Flexibility in a Nutshell

Whether you implement your chosen method using a budgeting app or pencil and paper, staying flexible with weekly monitoring and planned splurges is easy. Regular reviews help stop overspending before it gets out of control.

Planning your splurges by including them in your budget under “wants” or “expenses” can fill you with anticipation and allow you to savor the experience without guilt. Plus, ditching an all-or-nothing mindset means you’re less likely to go on a spending binge.

Creating a realistic budget doesn’t have to be a solo project. Shretta Godbolt, SAFE Federal’s new financial counselor, can help you create a personalized plan to live within your means, pay down debt, save for retirement, and more. Schedule an appointment with her today by calling 800.763.8600, extension 2211.