Ace Your Budgeting Skills By Adding These 5 Buckets In Your Budget
Budgeting is one of the most interesting ways to work with your money. Everyone makes money. But not everyone handles that money the same way. The way you handle your money and the way in which you utilize it determines the way in which you improve your cash flow. When you have investments to handle when you wish to save taxes, you should work towards reducing your expenses or rather prioritizing them. Investments could be of any form – trading with bots or trading in the market live or even in the long term managed funds. But they all need a good capital, to begin with. And this capital can be accumulated if you have a good budgeting strategy in place. Bucket budgeting is one method where you assign sub-accounts for each type of expense you regularly make in a month. Here are the most common buckets that can make it easy to streamline your personal finances –
- Emergency bucket
As the name indicates this one is for the emergencies. Make sure that you take out a little sum each month to grow your emergency funds.
- Insurance and investment bucket
The size of this bucket would depend on the regular installments that your investment plans call for and the short-term investment plans you have in your mind. Insurance premium payments might be yearly or one time depending on the chosen insurance plan.
- Fixed bucket
These are the fixed expenses that cannot be avoided or postponed like say the energy bills, phone bills, rent or mortgage installments etc. This is the one that should be filled in the first place as these expenses cannot be moved to another month.
- Temporary bucket
This holds the funds for the dynamic expenses that you might tackle in a given month. These are difficult to predict but you should keep a limit on the funds you assign in this one.
- Debt bucket
This bucket should also be filled along with the fixed expenses bucket as postponing your debt repayment might lead to penalties or could also impact your credit score. So this is another bucket that is on high priority.
The bucket budgeting method can be applied in many ways. The naming of the buckets and the types of buckets used also might differ. The above are a few examples to inspire you to kick-start your personal budgeting in a more systematic way.