Tired of living paycheck to paycheck? Want to save for a big item? Overwhelmed by debt? A budget helps you keep track of where your money is going and gives you more control over it.

Flaticon IconThere are a few ways to approach this task depending on your needs.

Method #1: Inflows = Outflows

Cash inflows - outflows = zero. What you earn is equal to what you spend each month.

Flaticon IconBest For:

People who have a steady income each month or can accurately estimate their monthly income.

Process:

Compare your monthly income to your monthly spending. Make sure you prioritize your expenses. Set aside money for the most important expenses, such as rent, food, transportation, and healthcare.

Considerations:

  • You have no savings left, which is not desirable.

  • Consider putting your monthly expenses in a spreadsheet to keep track of them.

Method #2: Maximize Savings

Try to save as much as you can after your expenses.

Best For:

People who are focused on saving their income or repaying debt.

Flaticon IconProcess:

When you get a paycheck, first set aside a specific, pre-determined amount for savings and debt payments.

Considerations:

  • You may need to adjust your spending habits and focus on maximizing your savings.

  • As you reach your savings or debt repayment goals, you can adjust the monthly "set" amount to focus on other financial goals.

Example Budget:Byte Author Uploaded Image

Method #3 Debt Repayment

Key Concept:

Reduce or pay off your debt.

Best For:

People with outstanding debts.

Flaticon Icon

Process:

Like the "Maximizing Savings" method, you might choose to put a pre-determined amount toward paying off your debt each month.

If you have multiple debts, focus on paying off the most expensive, high-interest debt first.

Considerations:

  • You need to track the interest rate on your all debt and rank them

Meet Gwen

Flaticon IconGwen works as a server and earns about $2,200 per month.

She has been trying to pay off her student loans and also wants to save to move into her own apartment.

Quiz

Which Budget Method is best for Gwen?

Debt Repayment

Inflows = Outflows

Maximize Savings

Summary

Which method is right for you?

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License:

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This Byte has been authored by

AP

Alexandra Palmer

Associate at The Carlyle Group

AC

Amy Chen

Global Credit Management Senior Associate

EW

Evie Wen

Be financially literate , smart and responsible

CG

Claudia Garcia

Experienced AP Specialist always willing to learn

EM

Evan Middleton

Managing Director - Carlyle Group