Top To Bottom Or Bottom To Top ?The majority of people budget in one of two ways when it comes to types of budgeting by households. I called them “bottom to top” and “top to bottom”. However, there are several differing definitions of this terminology flying around, mainly regarding businesses or governments. First, a few fast meanings:
Bottom To Top Budgeting:
Is concentrating on your spending and attempting to manage each one. You retain track of your spending, both item-by-item along with lists or by category using a software program like Quicken, Quickbooks or Mint.com. You analyze each expense and choose consciously if you should reduce or if you're pleased with the total amount being spent. Whatever remains, is put in a savings account.
Top To Bottom Budgeting:
May be the simpler, big-picture kind of cost management. You choose just how much you need to conserve out of your income, oftentimes by percent or total amount. Good examples: I wish to conserve 10% of my take-home pay. I want to save $1,000 a month. Once you determine just how much you need to save, you merely attempt to arranged that aside, and spend the remainder in fashion.
On the other hand, you might say “I wish to spend $3,000 per month total.” I still consider this top to bottom budgeting if you're not really taking a look at each expense individually each month. The main focus continues to be essentially saving some fixed amount for the future.
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