How Proportional Budgeting Can Help With Your Personal Finances
Trial and error are important in learning to manage your personal finances, but you can worry less knowing Carolina Payday Loans, Inc. is ready to help! This guide will show you how proportional budgeting can simplify how you manage your money and how a payday loan can bridge any gaps as you adopt this new approach.
More specifically, you’ll discover how proportional budgeting is different from the traditional approach and the advantages it offers. You’ll find out about the common challenges of budgeting and how to overcome them as you continue learning.
Traditional Vs. Proportional Budgeting: What’s The Difference?
The best way to understand proportional budgeting is to compare it with the traditional budgeting approach most people use. Traditionally, most people start their budgeting process with their total income for the period, whether that’s weekly, bi-weekly, or monthly. Then, they calculate their total costs and deduct it from that total income.
Those costs will include things like food, rent, entertainment, and more. Some people include the amount they want to save as part of those costs, while others simply keep whatever money is left over at the end of it all. Traditional budgeting is a good way to get started, and it works well for most people.
However, you can also consider proportional budgeting as an alternate approach. This budgeting method involves dividing your total income into different portions, each with a specific purpose. For instance, those individual portions could be for your wants, needs, and savings, respectively.
Furthermore, you can size those portions any way you want to. All of them could be an equal split of your total income, or you could devote specific portions of your income to each of them, depending on your priorities.
A common portioning is 50/30/20, i.e. 50% of your income for needs, 30% for wants, and 20% for savings. Of course, you can add or remove portions as needed to fund your life. We explore how proportional budgeting could work better for you than the traditional approach to managing your finances.
What Are The Advantages Of Proportional Budgeting?
Here are 3 reasons why proportional budgeting stands out compared to other approaches:
1. Requires Less Effort
For starters, proportional budgeting requires a lot less effort to do. That means it can encourage newbies to adopt budgeting as a consistent habit. Better yet, it also makes it easier for people with busy lives to find time for budgeting. Instead of worrying about every single item you might have to pay for, it’s much easier to group them into common portions or categories like ‘wants’, ‘needs’, and ‘savings.’
2. Builds Financial Discipline
Another side effect of portioning your expenses into different categories is that it helps you build financial discipline. Simply put, this form of budgeting allocates a fixed amount of money for a specific purpose. You’ll have to build your discipline to ensure you stay within that fixed amount to ensure you can meet all your financial needs.
3. Simplifies Decision-Making
One of the most challenging questions to answer regarding personal finances is, “Can I afford this?” Proportional budgeting makes it much easier to answer that question, thereby simplifying your decision-making process. For example, you only need to ask yourself:
- Is this a need or a want?
- Do I have the money in that portion of my budget?
Do that, and you’ll have an honest answer for whether or not you can afford something!
What Are Common Budgeting Challenges, And How Can You Overcome Them?
Budgeting can be challenging, and that’s especially true when switching budgeting methods. So, you must expect there to be a learning curve as you try on proportional budgeting.
For example, you might make mistakes, find unexpected costs, and run out of money. You can prepare for that by knowing how to borrow money on short notice to fill that gap until your next paycheck comes in. A payday loan is an option you can consider.
That’s a quick and easy way to borrow money for the short term until you receive your next paycheck. You don’t even need good credit or collateral to apply! A timely financial boost like that can help you learn from your mistakes and continue adopting your new budgeting method successfully.
Get The Help You Need Now!
Now that you know more about proportional budgeting, you can get started on working it in your budget! And if you ever need help as you adjust to proportional budgeting to improve your personal finances, you can turn to Carolina Payday Loans, Inc. at any time! Just reach out by submitting the online form on our website with your contact information. Soon after that, a representative will call you to discuss your needs and help you get the timely financial boost you need!
Note: The content provided in this article is only for informational purposes, and you should contact your financial advisor about your specific financial situation.