When it comes to budgeting, many people try and give up.
They get excited to take control of their financial situation only to realize the budget they are using is too time consuming or doesn’t work for them.
The problem here isn’t that budgeting doesn’t work for them, it’s just that they chose the wrong budgeting method.
You see, there are endless ways you can create and follow a budget.
In order for it to work for you, you have to find the right one.
In this post, I share with you 17 types of budgeting methods to help you find the perfect fit for you.
By the end, you will have an idea of which method will work best for you.
17 Types Of Budgeting Methods
Finding The Right Budget For You
The most important thing you can do when budgeting is not give up.
There is a perfect budget out there for you, you just have to find it.
Take me as an example.
I tried 4 different types of budgets in my life until I found the one for me.
Was it frustrating to start and stop, over and over?
You bet it was.
But it was worth the struggle in the end.
When you find the perfect spending plan for you, you are excited to track your spending and improve your finances.
Spreadsheet Budget vs. Budget App?
Before we get into the budgets to consider, there is one more thing you need to take into account.
What type of person are you?
Are you the type that enjoys working with spreadsheets?
If so, spreadsheet budget templates are probably best for you.
- Read now: Discover 17 free budget templates to try
If you hate spreadsheets, then consider an app based budget.
It is important you know what you like as this will also have an impact on whether or not you stick to your budget long term.
Finally, if you want a hybrid option, look no further than Tiller Money.
It combines a spreadsheet with an app that automatically updates your budget for you.
It’s one of the fastest growing and most popular budgets out there.
#1. Zero-Based Budgeting
A zero-based budgeting strategy is one in which you aim to create a budgeting category for each of your expenses that utilizes every dollar of income you have coming in.
Let’s imagine that you work a traditional 9-to-5 and you know that you will be receiving exactly $4,000 each month, every month.
With a reliable income in place, you can create budgeting categories like rent, utilities, and transportation, as well as less stringent ones like savings and entertainment.
This will allow you to calculate exactly how much of all your income you’re going to allocate towards these different categories.
Aptly named, after all your budgeting categories, you should end up with exactly zero dollars left over as you’ve successfully given all of your funds towards a specific expense or cause.
Why might one choose a zero-sum budget?
Unlike other budgeting strategies, this gives you a comprehensive overview of your money habits.
It also allows you to understand exactly how your money is being spent so that you don’t spend it on unnecessary purchases.
That being said, this budget may only work for those who have a steady income each month.
If there are any fluctuations in your income, it can be difficult for you to create a zero-based budgeting plan.
#2. The Pay Yourself First Budget
If you’re like many Americans, you use your money for your expenses, which is crucial to managing your home and other needs.
However, the issue that many face is utilizing the money they have leftover in a responsible manner.
After all, once you spend all of your income on living costs, it can be difficult to contribute reasonable amounts of money to your savings or other investments.
This is especially true if you find yourself living paycheck-to-paycheck.
With the pay yourself budget, you prioritize saving first by setting aside a certain percentage towards savings.
This could pertain to your main savings accounts as well as other savings goals like your travel funds.
For example, you may decide to put away 15% of your income each time you receive a paycheck and another 5% towards your travel fund.
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This type of budgeting method does come with risks.
For example, if you have a fluctuating income and you set aside too much at a time, you run the risk of having to dip into the money you saved in order to afford your living expenses.
It’s important that you properly plan ahead with this type of budgeting method and make sure that you’re setting aside enough money while also having plenty to spend for your main budgeting categories.
#3. The Envelope System Budget
When you spend money, it likely feels like you’re not spending at all because you’re using your card or another payment method to do it.
This leads to a major problem. Overspending.
Sometimes, the best way to tackle this is by doing the majority of your spending with cash rather than relying solely on your credit card to leverage your income.
- Read now: Learn the pros and cons of credit cards
This is the main premise of the envelope method or cash only budget, which is a traditional budgeting method because it has been in use for decades.
For each of your main living expenses and additional spending categories, you create an envelope for each and fill these with cash at the beginning of the month.
Then, when you need to go spend for that category, you take the set amount of cash and use it for its intended purpose.
Sometimes, however, you may have to dip into another envelope in order to afford certain expenses.
When this happens, you simply move money from one envelope to the envelope you need more money in.
For the envelope you took money from, you now have a smaller amount of money to spend there.
Some swear by the envelope system budget.
However, it does come with some disadvantages.
The main disadvantage is that it doesn’t have any specific way to manage spending or certain categories of spending that don’t utilize cash, like paying your rent or utilities.
Additionally, it can be a hassle for some to have to pull out all of the money that they need for the month and keep this cash on hand.
Luckily, there have been some apps recently that have begun to use the cash budgeting method and turn it into a digital version so you don’t need to deal with cash all the time.
If the envelope system budget works for you, great!
However, if you find that it’s not the most efficient should you decide to try it, you can always test out one of the other budgeting methods on this list.
#4. The 50/30/20 Budget
The 50/30/20 budget, which is part of a larger budgeting method known as a proportional budget, is a type of budgeting technique in which you have a predetermined percentage of your income that you allocate towards a specific purpose.
In the case of the 50/30/20 budget, you allocate 50% of your budget towards needs, like rent, car insurance, groceries, etc., 30% towards discretionary spending or wants, like eating out, entertainment, etc., and 20% towards savings and debt repayment.
Of course, you can always adjust these percentages to best fit your personal spending needs as well.
The 50/30/20 rule or other proportional budgets are great if you don’t have complex spending needs.
It can also simplify your spending so that you’re not worrying about detailing every dollar you spend into s specific expense category like with most other budgets.
However, it’s important to note that this budget may not be for those with complex needs such as having to allocate some of their funds towards a debt repayment plan.
It also doesn’t detail your spending goals as specific as some may need.
Of course, you could always take the time to categorize all of your spending so you have this information.
This budget is widely used, but it’s important to weigh these pros and cons before considering a proportional budget for your needs.
#5. 30/30/30/10 Budget
The 30/30/30/10 plan is a popular variation of the 50/30/20 rule above.
Instead of breaking things down into 3 buckets, you use 4.
Here is the breakdown for each:
- Housing and transportation: 30%
- Needs (Utilities, groceries, etc.):
- Financial Goals (Debt repayment, savings): 30%
- Wants(Entertainment, dining out, etc.): 10%
The reason why some people prefer this budgeting process is because of less wasteful spending.
What do I mean by wasteful spending?
I am talking about spending money on wants.
With the 50/30/20 plan, you are budgeting 30% of your income towards wants.
If you are making $2,000 a month, this means $600 of your money is going towards things you don’t need every single month.
Think about how much farther ahead you would be if you put some of this money towards savings or debt repayment.
With the 30/30/30/10 rule, you only put 10% of your monthly income towards wants and put more money towards improving your finances.
Using the example above, this means you put $200 a month towards wants and you have $400 to pay off debt or save money to improve your financial health.
#6. 60/20/20 Budget
Yet another variation on the 50/30/20 plan.
This one is not as well known as the others listed.
It follows the same principle as the others, just with different percentages.
Here is the breakdown for this plan:
- Housing and Other needs: 60%
- Savings: 20%
- Wants: 20%
This version is very similar to the above.
In both cases, 60% is going towards housing and other needs, it is just combined into on spending category here.
The main difference is you are allowing yourself an extra 10% of income for wants.
At the end of the day, you can use any variation of these proportional budgets as you like.
For us, I modified it to be the 70/20/10 plan.
Here, 70% of our monthly income goes towards all expenses, including housing, utilities, groceries, and wants.
Of the remaining amounts, 20% goes towards savings and additional debt payments and 10% goes for tithing.
Since we have zero debt other than our mortgage, when we make extra mortgage payments, this money comes from the 20% allocation.
The bottom line is, pick the allocation of spending categories that makes the most sense for you.
#7. The Line-Item Budget
The line-item budgeting method is often perfect for those who are just getting into budgeting and want to make sure that they’re using their income responsibly.
A line-item budget is one in which you create a typical budget featuring all of the categories that you can anticipate putting money towards on a monthly basis.
Once you have this budget established, you will then list your expenses through software such as Excel, and keep an eye on your spending over time.
Then, you can use this past information to see if you’re spending more than you should be and adjust accordingly over time.
This type of budget is easy to create and manage for the average person.
However, this type of budgeting method doesn’t take into account things like savings and investments, which means that it can be easy to end up setting aside too much money for non-essentials like entertainment or miscellaneous spending.
As long as you put a greater emphasis on including these items into your budget, you should be able to navigate this budgeting method relatively easily.
Just make sure that you find the right software for your needs so you don’t spend an extensive amount of time trying to budget!
#8. Half Payment Budget
The half payment budget came about when people started to get paid twice a week as opposed to weekly.
When the frequency of their paychecks changed, but their bills did not, budgeting became more complicated.
As a result, many people started to get into debt.
With the half payment method, you solve this problem.
It works by taking your bills and dividing them in half.
When you get your first paycheck, you pay half of all your bills. When you get your second paycheck, you pay the other half.
Understand that you are not mailing in half payments.
You are saving the money to be used for paying upcoming bills.
For example, if your rent payment is $1,200 a month, you would save $600 from each of your paychecks to pay next month’s rent.
Doing this allows for more money to stay in your checking account since most people have the majority of their bills due at the same time of the month.
The biggest catch to this budget is you need to move the money you are saving into a separate bank account.
Some people use a second checking account, while others set up a dedicated savings account.
You do what works for you, but you need to move the money so you are not tempted to spend it.
#9. Kakeibo Budget
The Kakeibo budget method is a more mindful way to budget your money.
Not only are you categorizing and planning your spending for the upcoming month, but you also are required to take time to reflect on how things went and how you can do better.
This reflection can be done at month end, but is best done more frequently, like weekly.
The setup is similar to other budgets where you calculate your monthly income and subtract your monthly expenses.
Your expenses are broken down into four spending pillars or categories:
- Needs: Anything you need to survive, like housing, groceries, etc.
- Wants: Anything you want to have but don’t need to survive, like entertainment, dining out, etc.
- Culture: Anything related to cultural events, like cable TV, concerts, museums, etc.
- Unexpected: Unplanned expenses that are not planned for, like home repairs, other bills, etc.
You are also instructed to set up a savings goal for the month and try to save that amount.
At the end of each month, or weekly if you choose to, ask yourself the following questions:
- How much money do I have?
- How much money would I like to save?
- How much money am I spending?
- How can I improve?
The goal of this budget is to get you think about money more and save more of it every month.
Many have found that it works great because they are more intentional with their spending and saving.
#10. Calendar Budget
The calendar budget is arguably the most underrated and best budgeting methods out there.
Whereas most budgets simply have you list out your income and expenses and try to get the numbers to work, a calendar budget takes a different approach.
You lay out your income, expenses, and saving on a calendar.
This helps you to visually see what is happening with your money.
For example, you will see that on the 28th of the month you have a large bill due, so you proactively cut back on spending that week so you have enough money in your account to pay it.
Another benefit is it allows you to better save.
Again, you see when you have money coming in and going out, so you can more confidently make decisions about transferring money to savings or putting extra money towards debt.
Finally, this type of budget helps you to pay your bills on time.
By seeing when they are due, you increase the likelihood of paying on time and therefore avoid paying late fees or lowering your credit score.
Overall, this is a great budget that many people dismiss for some reason.
#11. Paycheck Budget
The paycheck budget is similar to the half payment budget but different as well.
Instead of budgeting once a month like many budgets have you do, this budget has you assign spending each time you get paid.
So if you are paid weekly, you will budget 4 times a month.
If you are paid bi-weekly, you will budget twice a month or sometimes 3 times a month.
Each paycheck then gets assigned to pay certain bills.
For example, if you get paid on the 1st and 15th of the month, you can use your first paycheck to cover your rent, since it is due at the beginning of the month.
If you have an auto loan that is due on the 25th of the month, you can use the second paycheck to pay this bill.
- Read now: Discover the pros and cons of bill pay
By using this budget you get a better idea where your money goes as you are actively assigning your income to expenses.
An added benefit is that because income and expenses vary, this budget can help you avoid paying overdraft fees.
- Read now: Learn what overdraft protection is
The final benefit is that since you see where your money is going, you can more easily pick times to save.
Even if you are only saving a little bit of money, it is better than nothing.
#12. Bare Bones Budget
Are you in a mountain of debt and looking to pay it off as quickly as possible?
Maybe you want to save 50% or more of your income so you can retire early?
Or maybe you just want to improve your finances and finally build an emergency fund.
Whatever the case, the bare bones budget could be the system for you.
With this budget, you eliminate all unnecessary spending and only spend money on essentials.
And when I say essentials, I mean the bare minimum,
For example, you spend money on gas for your car, but you only drive to and from work as well as make errands that need to be made.
You cannot drive to hang out with your friends at the bar on a Saturday night.
And speaking of going to the bar, this is no-no as well since it not essential.
The bare bones budget is a strict budget system that isn’t easy to follow emotionally.
I know because I tried a version of it when I was trying to get out of debt.
- Read now: Learn how I overcame debt
- Read now: Discover Dave Ramsey Baby Steps for improving your finances
I cut out all wants from my budget, including spending time with my friends.
It was great for a little bit, but then I started to resent my debt because I couldn’t have any fun.
Eventually, I rebelled and started to overspend.
I knew I had to make a change, so I allowed myself a little spending money on entertainment.
If you try this budget, you need to be open to making adjustments and possibly allowing yourself to spend some money on non-essentials.
#13. The No Budgeting Budget
The no budgeting budget is unique in that you budget without actually setting up a budget.
It is perfect for people who are doing OK financially, meaning they are not going into debt but want to save more money.
Instead of creating a budgeting system where you list all your spending categories, then assign a dollar amount to them and track everything, you pick a few categories to track.
The categories you pick should be variable costs, like grocery shopping, dining out, entertainment, etc.
This is because you can spend a lot more money in any of these categories in a given month versus your mortgage or your rent, which is fixed.
You then track your spending in these categories.
You will quickly see just how much or how little you spend here and can make adjustments going forward.
For example, you might realize you are spending $500 eating out when you thought you only spent $100-$200 a month.
This is enough of an eye-opener to have you change your habits by eating out less often and saving the difference.
The nice thing about this budget is you can change the categories you track each month.
Maybe you find that eating out isn’t a large expense for you, so you stop reviewing it and start reviewing your entertainment budget.
Another way to use the no budgeting budget is to not track anything, but save money first.
You do this by transferring money to savings each time you get paid and then you are free to spend all the money that is left over.
- Read now: Find over 100 ways to save money today
By paying yourself first, you ensure you save money every month and as long as you don’t go into debt, you will be getting ahead.
Finally, you can also choose to just track your net worth.
Your net worth is a summary of what you are worth when you subtract all the money that you owe to others from all the money and things you own.
- Read now: Learn how to calculate your net worth
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By growing your net worth monthly, you know you are getting ahead financially.
#14. Variable Expenses Budget
This personal budgeting method is like the no budgeting budget above.
Instead of tracking all your expenses every month, you only track your variable expenses.
The idea is that since your fixed expenses, like rent, mortgage, etc. are the same each month, it is not time well spent tracking these.
You know what they will be every single month.
So when you set up your budget, you are only looking at expense categories that vary each month.
This would include things like groceries, entertainment, personal care, dining out, car maintenance, etc.
You focus on keeping spending in these areas in check and this should free up money for you to stop adding on to debt each month, begin to pay off your debt, or save money every month.
Of course, you still have to take into account your fixed expenses, otherwise you will have a very big surprise at some point during the month.
#15. Priorities Based Budget
A priorities based budget is a unique way of managing your money.
It has you list out your expenses based on priority.
Ask yourself, how do you want to spend your money this month?
The most important thing is the top budget category, after your income and essential items, like housing and food.
You then add other priorities in descending order, from most important to least important.
Once you list out your priorities, you than assign dollar amounts to each.
You ask yourself, how much money you want to spend on this category this month.
Work your way to the end of the budget and total up your income and expenses.
If you have money left over, you go back through the list and increase the amounts.
If you spent too much money, you need to lower the amounts.
Now you are spending money based on how you want to spend.
If an unexpected expense comes up during the month, you simply look at your budget and take the money from your priorities list starting at the bottom and working your way up.
This allows you to keep spending money on the things that are most important to you and reducing the amount you can spend on things that matter the least to you.
#16. Values Based Budget
The values based budget throws a traditional budget upside down.
It works by having you spend money on the things that matter to you most, or you value most.
The reality is, many of us spend money for appearance’s sake.
We want to fit in, so we buy the high-end designer hand bag or the luxury car because everyone in our neighborhood has one.
The problem with this way of spending is you easily overspend and as a result, will never reach your financial goals.
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This is because you buy all these things, but none of it makes you happy.
As a result, you are in an endless cycle of spending money and being miserable.
Suddenly you are trapped in a job you don’t like because you need the income to pay your bills.
With a values based budget, you take time to reflect on what matters most to you.
What do you want out of life? What makes you happy?
You then create a budget based on these things.
For example, if you value traveling, then you budget a percent of your income for this expense.
If you don’t value dining out, then you don’t budget for this.
After you make your budget, it will look a lot different than a typical budget.
This is a good thing.
It is something that is going to help you start spending money on things that you make you happy and eliminate spending on things that you don’t care much about.
After a few months of following this budget, you will see your happiness increase as you are doing more of the things you love to do.
And you won’t miss the other things because they never mattered to you in the first place.
#17. Flexible Budget
A flexible budget can be used a few different ways.
The most common way to use this budget is to first review your expenses.
While some expenses are fixed, like your rent or mortgage, many others vary from month to month.
While you cannot know for certain what each month holds, you can get clues on certain things by looking over a previous years worth of spending.
For example, you might notice that your entertainment spending balloons over the summer when your kids are home from school.
You might also notice that your electric bill is higher during the winter months when the heater is running more frequently.
Or you might see that spending on groceries increases around the holidays, as does your gift spending.
With this information at hand, you can adjust your monthly budget.
Take higher entertainment costs as an example.
If you know this spending will be higher in the summer months, you can budget in a higher amount.
Then during non-summer months, you can lower it and use the left over money for savings or other budget categories.
Another way to use incremental budgeting is for those with variable income.
If you don’t earn a salary but are paid on commission or own your own business, you know your income can swing wildly from month to month.
With a flexible budget, you can more easily plan for these swings and make adjustments to your budget as you go.
At the end of the day, there are many different types of budgeting methods for you to try.
The goal here wasn’t to overwhelm you with the possibility of options.
It was to show you there are many different budgets out there and you can find the one that works best for you.
Just be open to the fact that the one you think is right for you might not actually be right and you will have to try again.
As I mentioned earlier, I had to try 4 budgets before I found the one that worked for us.
The key is to not be frustrated and give up, but be open to the idea that you are getting closer to finding the fit for you and this will help you improve your financial situation.