Different Ways to Budget | Cash Course | PragerU Kids

Hey, Cash Course fans! Before we start the show, remember that you can get hundreds of free educational videos for all ages at PregnerUKids.com. Subscribe today and never miss an episode. Jenny, we've been going out for a while now and... Well, there's something I wanted to ask you. Yes, Chris? What budgeting method do you use? Oh, I don't know. A mix of this and that. Budgeting has never been my strength. I was afraid you'd say that. Are you breaking up with me? No, but I do have something for us. Waiter? Ma'am, this gentleman has requested a special for you today. Budgeting methods? Budgeting is an important and necessary tool for managing your money, but the tools you use to budget can be different depending on your circumstances and season of life. Your budget will also look different from those around you, including your parents or friends. A good starting point for budgeting is the 50-30-20 method. In this method, you set aside 50% of your income towards your needs, 30% towards your wants, and 20% towards your savings. If you're new to budgeting, this method is a simple way to get started. Get started? You mean there's more? Of course there's more. The 50-30-20 method might work great, but let's say you get a raise, a whole 10%. Utilizing incremental budgeting allows you to start adjusting your previous budget when your needs change. Let's say you spend $1,000 monthly on food, but you can now afford to bump that up to $1,100 with your raise. That's an incremental change that can be done to any area of your budget. If you really want to discipline yourself and see where your money is going, consider envelope budgeting. This involves putting your budget into actual envelopes with cash. One envelope for food, another for rent, another for school supplies, and so on. Whatever the categories, this method will help you spend and save more intentionally. Using plastic for all of your purchases may be convenient, but you'll more likely make wiser choices when you pay in cash and see where your hard-earned money is going. Or perhaps your goal is a big purchase, in which case paying yourself first budgeting could be useful. This means putting aside more money toward a specific goal and then figuring out how to live off what's remaining. If this leaves you with a tighter daily living budget, you'll have to find areas to cut back until your goal is reached. You may be eating ramen for a couple of months, but sometimes you have to live on the cheap now to enjoy the fine meal later. Now, say there's been a major change in your finances due to changes in your job or living situation, and your previous budget no longer works. You may need to utilize zero-based budgeting and start from scratch. This means creating a new budget and reconsidering your goals, needs, and expenses. You can play around with the numbers to make a budget that fits your current situation better. Look at the next special. It says we can do this one together. Oh, tell me more. That's called participative or negotiated budgeting, and it involves two or more people working together to create a budget, such as starting a business or working on a school project. You can negotiate your budget based on everyone's needs and wants, but be prepared to compromise to meet your shared goals. I know what I want now. Me too. Before you decide, take a look at today's special action steps. One, decide what your priorities are. After your essentials are covered, you have the flexibility to prioritize. Whether saving for a big-ticket item or creating an emergency fund, these priorities will determine how you build your budget. This also means your budget will look different from your friends', so don't be pressured by their priorities. Two, get advice or helpful tools. Find a trusted family member or other expert who can review your budget and advise you on allocating your funds. Utilize budgeting apps, spreadsheets, or other online resources that can help you keep track of your finances. Three, check in and update regularly. Budgets are made to change. Whenever your financial goal or income changes, revisit your budget and ensure everything still checks out. Adjust where needed and watch for unnecessary spending that doesn't contribute to your overall goals. No matter what type of budgeting you use, remember that it's a tool meant to help you, not hinder you. A well-thought-out budget can help you take control of your finances and prepare you for any surprises that may come your way. When you finally achieve your goals, you'll be grateful you had a plan and stuck to it. Do you want me to chip in? Oh, no, no. I've been budgeting for this day for a long time. That's the most romantic thing anyone has ever done for me. Watch more at PragerUKids.com. And parents, don't forget to subscribe.