There are so many budgeting methods out there that could potentially help you get control on your financial matters.
They can help you work towards a more stable and secure financial future that can be confusing and sometimes overwhelming trying to figure out where to start.
We’ve worked to provide a sort of library that included information in various budgeting methods to give you the knowledge you need to make informed decisions and decide what might work best for you.
- Cash Envelope Budgeting
- Cashless Envelope Budgeting
- Zero Sum Budgeting
- 50/30/20 Budgeting
Below I will break down the method of the glass jar budgeting method in 5 easy steps.
1. Get an Overview
First things first, before you can start any sort of budget or begin taking control of your financial matters, you need to figure out what you are working with: your income, your expenses, your debt and the plans (realistic plans) you want to make for the foreseeable future.
Grab your last three bank statements and make a list of all your fixed expenses.
These would include rent/mortgage payments, utilities, cell phone bill(s), insurance (if you pay it monthly), monthly bus pass, debt payments etc.
Then list all of your variable expenses you have in a month, such as groceries, gas (unfortunately we never know what the gas gods decide the price should be from one hour to the next), toiletries, pocket money etc.
Now, subtract the total amount of your fixed expenses from your monthly income.
This is the money you have left over to cover your variable expenses and your savings.
Time to budget.
This step and the one that follows titled “cut expenses” are closely related and can be used interchangeably, because sometimes it is easier to see where to cut costs right after making that wonderful list in step number one.
Or it becomes more motivational to start cutting unnecessary expenses after you have made the budget.
Then you go back and make adjustments to it to fit your needs and new expectations.
Either way a budget needs to be made and a good one. Based on your past spending on groceries you can decide how much money a month you would need to cover the grocery bill.
Then figure out how much on average you would need for gas, toiletries, pocket money etc.
Write these amounts beside the category on your list.
3. Cut Expenses
Now that you see all of your expenses written down clearly in front of you, you might find that your expenses are greater than your income or that you just really don’t need that certain monthly subscription or cable TV.
As I said before, you might find that while you are listing all of your expenses you begin to realize that some of them have become completely unnecessary and are just sucking your hard earned money out of your pockets, so you scratch them off the list and cancel the service right away.
Other times, these expenses are not as easy to identify until after you have made your budget. No need to worry.
Making a budget from scratch the first time will have a certain trial and error phase during which you need to make adjustments to accommodate changes in pricing and lifestyle. Although, you are trying to adjust your lifestyle as well, in order to live a more frugal life.
Having said all of that, take a look at your cable TV bill. I love addressing cable TV as an unnecessary expense, because it is so ridiculously overpriced and nowadays it really isn’t necessary.
So, you spend $100 each month on a service that you cannot control (the programming is fixed by the broadcaster) and that might add more stress to your life, because you are trying to hurry so you won’t miss the start of an episode of your favourite show.
Who needs that stress? We run around like chickens without heads plenty without having to add that to our free time.
And what about those magazine subscriptions? Or subscription podcast services you haven’t used since last winter?
Check out your local library. They usually offer a lot more than just the lending of books.
Their digital catalogue may include free access to hundreds of different e-magazines (digital versions of you favourite magazines for free), podcasts, audiobooks, even access to scholarly journals.
If you see a trend emerge, for example you only listen to audiobooks in the summer when taking long evening walks or going for a run. Cancel your audiobook subscription for the rest of the year.
Most of the service providers will send you incentives to sign up with them again, so it might be worth making them work a little for your money.
4. Set Up Your Jars
Alright, so you made your list of expenses, fixed and variable, made your budget, cut your expenses to make more money available for savings or paying down debt.
Now, it’s time to dust off those jars and get some cash. Decide how many jars you need; one jar per category that you have listed in steps number one and two, label them accordingly and either add the designated amount of money for the entire month, just for the week, or stock up your jars bi-weekly as your paychecks come in.
The jars, physical or a digital version of them, can be very helpful organizing and taking control of your finances, but keep in mind a few things that may throw you for a loop.
You may have automatic payments coming out of your chequing account each month. Remember those fixed expenses? Not all of them require you to actively pay them monthly.
About five months ago I switched my internet provider with the option of setting up automatic payments each month.
It’s easy and convenient and takes the stress out of remembering to pay the internet bill on time, because life sometimes happens and things slip our minds.
But I have to make sure there is still enough money left in the account to cover that bill or my account goes into overdraft and that is just bad news.
5. Track your Spending
A very important part of having a budget is not only to stick to it, but to track your spending.
Save those receipts and double check if you are allocating enough money for groceries or if you are taking money out of other jars to cover the cost.
Let’s say you notice that you are running low on funds for gas one month.
You can either take out a bit of money out of your pocket money jar or make the decision to not use your car until it’s time to restock the gas money jar.
Keep an eye on recurring low funds and decide if you should increase your budget for that particular category or if you need to make adjustments to your lifestyle to stay within your budget.
There are plenty of different ways to start your budgeting venture. Above I have outlined the old fashioned, but highly effective, glass jar budgeting method.
With a little bit of time and hard work this method could help you create a solid foundation to build your financial future on.
With all new things, this may take a few trials and adjustments, but I promise you, once you get a hang of it, it’ll be highly rewarding.
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