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A Brand New Budget Methodology

When it comes to budgeting, there are many different approaches you can take. In fact, here are three main budgeting methods used by many people.

Three Current Budgeting Methods

There are many different budgeting methods available to use in today’s world. Here are three of the most popular.

No. 1 – The Zero-Based Budget

The concept of this budgeting method is quite simple. Income minus expenses equal zero.

This method tends to be used by those who have a set income each month. The idea is to ensure that your monthly spending and savings always add up to your calculated monthly income.

No. 2 – The Envelope Budget System

This method is similar to the Zero-based budget system, but there are a few differences.

The biggest difference is that you primarily work with cash. At the beginning of each month, you plan out all your expenses. You then withdraw all the cash to cover these expenses and place it in specific envelopes. Each envelope represents a specific expense or spending category.

When the money is gone, no more money may be spent in that specific category for the rest of the month. This is a pretty full-proof way to ensure you never spend more than you intend to. In other words, it helps you to control that your expenses never exceed your income.

No. 3 – The 50/30/20 Budget

This budgeting method is very straightforward. The idea is to break down your expenses into three categories.

  • Necessary expenses (50%)
  • Discretionary expenses (30%)
  • Savings and debt payments (20%)

And that’s pretty much all there is to it. You can also tailor the percentage concept to your needs or change the percentages to fit your lifestyle.

A New Way to Budget

The three budgeting methodologies listed above are excellent ways to budget, but they are not the only solution.

Here at Spreadsheet Life, we created something called the Excel Money System. The Excel Money System is a bundle of spreadsheets and instructions designed to introduce a new budgeting methodology adaptable to everyday life.

The problem with the Zero-based budget is that not everyone’s income is always consistent. The problem with the Envelope system is that cash is becoming more outdated. And finally, the problem with the 50/30/20 method is that it’s hard to plan for specific expenses or goals.

This is where the Excel Money System can make some improvements.

The Funds Budget System

The Excel Money System introduces the use of the Fund Budget methodology. The Fund methodology takes some inspiration from all three budgeting systems listed above.

The idea is to take all your money and sort it into funds. These funds are essentially digital envelopes that give your money a purpose. You then spend your money from these funds, and when the fund hits zero, you can’t spend any more money from that fund.

The use of funds allows you to do all of the following:

  • Ensure that you never spend more money than you have
  • Give every dollar a job or assignment
  • Keep all your money clearly organized
  • Set and reach multiple savings goals

Funds allow you to do many other things as well. To better understand the concept of funds, take a look at the following detailed explanation.

What in the World are Funds?

You can think of funds as digital envelopes. Each fund or digital envelope represents a category that your money can be assigned to.

For example, if you have an Emergency fund, then any money assigned to this fund should only be used in the case of an emergency.

If you have a Video Games fund, money assigned to this fund is reserved for buying or renting video games.

As you earn income throughout the year, you will take the money that you’ve just earned and assign it to various funds.

For example, if you received a paycheck for $2,000.00, you can assign $500.00 of that money to one fund, $700.00 to another fund, and $800.00 to still another fund.

Likewise, when it comes to spending money, you can decide which fund the money should come out of.

For instance, if you spend money on video games, you can decide to apply that expense to the Video Game fund.

Funds provide the ability to give your money a purpose and tell your money where to go.

There are Two Types of Funds

In the Excel Money System, there are two types of funds. There are Stash funds, and there are Month funds.

Both types of funds work the same way in that you can assign money to and spend money from either type of fund.

However, there are two main differences between Stash funds and Month funds. Those differences are the intended use and the number of sections within the fund itself.

Stash Funds

The Intended Use

Stash funds are intended for savings goals, irregular expenses, emergency savings, and other similar ideas. Here are a few examples:

  • House
  • Travel
  • Clothes
  • Car Maintenance

The idea is that Stash funds contain money reserved for a specific purpose. That purpose can be to eventually buy a house, save up for a trip, buy clothes when necessary, or cover an unexpected car maintenance cost.

You are basically “stashing” money away for a specific purpose.

The Number of Sections

Stash funds have only one section. In other words, all the money assigned to a Stash fund stays in one place.

Also, when an expense is attributed to a Stash fund, there is only one place for that money to come from.

Month Funds

The Intended Use

Month funds are for regular bills, monthly expenses, and many of your main budget items. A few examples are listed below:

  • Groceries
  • Transport
  • Internet Bill
  • Rent

The idea is that Month funds help you manage your month-to-month expenses. Spending a certain amount on groceries and transportation is usually a monthly metric, and bills for your internet and rent tend to come around each month as well.

Number of Sections

Unlike Stash funds, Month funds have more than one section. In fact, Month funds have a section for each month of the year.

You can picture Month funds as a giant envelope with multiple compartments – one for every month.

For example, in your Groceries fund, you would have sections for January, February, March, etc.

The name “Groceries” would represent the fund, and each month represents a section within that fund.

When you assign money to a Month fund, you must decide on a section as well. You also have the choice to assign money to several sections of a Month fund.

This allows you to plan ahead by assigning money to various months within each Month fund.

Expenses work the same way. When you attribute an expense to a Month fund, you must decide which section that money will come from.

If it’s February and you are buying groceries, then the money would come out of the February section of the Groceries fund.

Having and utilizing both types of funds is the central idea behind the Excel Money System.

Start Using the Fund System Today

You can purchase the Excel Money System to start using the Fund budgeting methodology today. This bundle of spreadsheets includes everything you need and will guide you through the whole process. Try it out and see for yourself!

Learn More

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