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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 doesn’t work for them.
The problem here isn’t that budgeting doesn’t work for them. It’s just that many people choose the wrong budgeting method.
You see, you can create and follow a budget in endless ways.
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 know which method will work best for you.
Table of Contents
17 Types Of Budgeting Methods
Finding The Right Budgeting Method For You
The most important thing you can do when budgeting is not to give up.
There is a perfect budget out there for you. You just have to find it.
Take me as an example.
I tried four 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, 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 best for you.
- Read now: Discover 17 free budget templates to try
If you hate spreadsheets, then consider an app-based budget.
You must know what you like as this will also impact whether or not you stick to your plan long-term.
Finally, look no further than Tiller Money if you want a hybrid option.
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.
Tiller Money makes spreadsheet budgeting simple and fast. Use their pre-made budget and let Tiller automatically import your transactions. All you do is categorize them and you are done. No risk 30 day free trial.
#1. Zero-Based Budgeting Method
A zero-based budget is one in which you aim to create a budgeting category for each of your expenses that utilize every dollar of income you have.
Let’s imagine that you work a traditional 9-to-5, and you know that you will receive exactly $4,000 monthly, every month.
With a reliable income, 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 precisely how much of all your income you will allocate towards these different categories.
Aptly named, after you finish budgeting, you should end up with exactly zero dollars left over as you’ve successfully given all of your money a specific expense or cause.
Why might one choose a zero-based budget?
Unlike other budgeting strategies, this gives you a comprehensive overview of your money habits.
It also allows you to understand exactly how you spend your money so that you don’t spend it on unnecessary purchases.
However, this option may only work for those with a steady monthly income.
If there are any fluctuations in your income, it can be difficult for you to create a zero-based budgeting plan.
Also, understanding the zero-based approach is time-consuming since you have to assign a category to every dollar you earn.
#2. The Pay Yourself First Budget
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 challenging to contribute money to your savings goals 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 primary savings accounts and 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, suppose you have a fluctuating income, and you set aside too much at a time. In that case, you risk dipping into the money you saved to afford your living expenses.
You must properly plan ahead with this type of budgeting method and ensure that you’re setting aside enough money while also having plenty to spend for your main budgeting categories.
#3. The Envelope System
When you spend money, it likely feels like you’re not spending at all because you’re using your card or another payment method.
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
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Paying with cash is the central premise of the envelope method or cash-only budget, a traditional budgeting method because it has been in use for decades.
Take your living expenses and spending categories, and create an envelope for each.
Then fill these with cash at the beginning of the month.
Then, when you need to 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 to afford certain expenses.
When this happens, you move money from one envelope to the one in which you need more money.
For the envelope you took money from, you now have a smaller amount of money to spend there.
Some swear by the envelope system.
However, it does come with some disadvantages.
The main disadvantage is that it doesn’t have any specific way to manage spending that doesn’t utilize cash, like paying your rent or utilities.
Additionally, it can be difficult for some to pull out all the money they need for the month and keep this cash on hand.
Luckily, some apps have begun to use a digital version of the cash budgeting method, making it easier to employ this plan.
This means you can use a credit or debit card to try out this budgeting method.
If the envelope system budget works for you, great!
However, if you find 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 Rule
After the zero-based budgeting method, the 50/30/20 rule is the next most popular option.
The 50/30/20 budget, 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 for a specific purpose.
In the case of the 50/30/20 rule, 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.
The 50/30/20 rule or other proportional budgets are great if you don’t have complex spending needs.
- Read now: Learn more about the 50/30/20 rule
It can also simplify your spending so that you’re not worrying about detailing every dollar you spend into a specific expense category like most other budgets.
However, it’s important to note that this option may not be for those with complex needs, such as allocating 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 your spending, so you have this information.
This budget is popular, but weighing these pros and cons before considering a proportional budget for your needs is essential.
Its popularity is because it is the least time-consuming method listed.
#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 three buckets, you use four.
Here is the breakdown of the budget targets:
- Housing and transportation: 30%
- Needs (Utilities, groceries, car payments, 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 your money on wants.
With the 50/30/20 plan, you are budgeting 30% of your income towards wants.
If you make $2,000 a month, $600 of your money goes towards things you don’t need every month.
Think about how much farther ahead you would be if you put some money into savings or debt repayment.
With the 30/30/30/10 rule, you only put 10% of your monthly income towards wants and more money towards improving your finances.
Using the example above, you put $200 a month towards wants and 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 budget 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 of 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 one 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 to 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 just getting into budgeting and want to ensure they’re using their income responsibly.
A line-item budget is one in which you create a typical budget featuring all the categories you can anticipate putting money towards every month.
Once established, you will 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 budget is easy to create and manage for the average person.
However, this type of budgeting method doesn’t consider 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 spending plan, you should be able to navigate this budgeting method relatively easily.
#8. Half Payment Budget
The half payment budget came about when people started to get paid twice a month instead of 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 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 you to keep money in your checking account since most people have most 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 more mindful of budgeting your money than other methods.
Not only are you categorizing and planning your spending for the upcoming month, but you also are required to reflect on how things went.
You also look into how you can improve for the upcoming month.
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 break your expenses 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, like home repairs, other bills, etc.
You also set up a monthly savings goal 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 to think about money more and save more of it every month.
Many have found that it works great because they are more intentional with spending and saving.
#10. Calendar Budget
The calendar budget is arguably the most underrated and best budgeting method.
Whereas most budgets simply have you list 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 layout helps you to see what is happening with your money visually.
For example, you will see that you have a large bill due on the 28th of the month, so you proactively cut back on spending that week and have enough money in your account to pay it.
Another benefit is it allows you to save better.
Again, when you see you have money coming in and going out, you can more confidently make decisions about transferring money to savings or putting extra money towards debt.
- Read now: Learn how to budget a 3 paycheck month
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.
#11. Paycheck Budget
The paycheck budget is similar to the half payment budget but also different.
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 get your pay weekly, you will budget four times a month.
If you get your pay bi-weekly, you will budget twice a month or sometimes three times a month.
Each paycheck then gets assigned to pay specific 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 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
Using this budget gives you a better idea of where your money goes as you actively assign 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?
Do you want to save 50% or more of your income to retire early?
Or maybe you 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 only drive to and from work and do errands.
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 a no-no since it is 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
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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 money to spend 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 because you keep an eye on your money without setting up a budget.
It is perfect for people doing OK financially, meaning they are not going into debt and have ample money in their bank account.
However, they want to save more to ensure they reach their goals.
Instead of creating a budgeting system where you list all your spending categories, you pick a few categories to follow.
You don’t assign a dollar amount to each category and track everything.
The categories you pick should be variable costs, like grocery shopping, dining out, entertainment, etc.
You pick these categories 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 the same every month.
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 significant expense for you. Hence, you stop reviewing it and start reviewing your entertainment budget.
Another way to use the no budgeting budget is not to 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 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 just to track your net worth.
Your net worth is a summary of what you are worth when you subtract all the money 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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You know you are getting ahead financially by growing your net worth monthly.
#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 follow 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 only look at expense categories that vary each month.
This would include 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 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 consider your fixed expenses. Otherwise, you will have a huge surprise 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 top budget category, after your income, and essential items, like housing and food, is the most important thing.
You then add other priorities, from most important to least important.
Once you list your priorities, you then assign dollar amounts to each.
You ask yourself how much money you want to spend on this category this month.
Work to the budget’s end and total your income and expenses.
If you have money left over, you go back through the list and increase the amounts.
If you spend too much money, you need to lower the amount.
Now you are spending based on your priorities.
If an unexpected expense occurs 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 most important to you and reduce the amount you can spend on things that matter the least to you.
#16. Values Based Budget
The values-based budgeting strategy 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 that many of us spend money for appearance’s sake.
We want to fit in, so we buy high-end designer handbags or luxury cars 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 this budgeting method, you 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, 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 making your budget, it will look different from a typical one.
This is a good thing.
It will help you start spending money on things that make you happy and eliminate spending on something 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 in a few different ways.
The most common way to use this budget is to review your expenses first.
While some expenses are the same monthly, like your rent or mortgage, many others vary monthly.
While you cannot know for sure what each month holds, you can get clues on certain things by looking over a previous year’s spending.
For example, you might notice your entertainment spending balloons when your kids are home from school over the summer.
You might also notice that your electric bill increases during winter when the heater runs 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 for a higher amount.
Then during non-summer months, you can lower it and use the leftover 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.
You can more easily plan for these swings and adjust your budget with a flexible budget.
Why You Need To Choose A Budgeting Method
The first step in the financial planning process is to develop a budget plan.
Once you have a plan for your money, you can make smarter financial decisions and control your money completely.
You can see your spending habits and take action, so you save more.
And if you get detailed, you can look at each spending category and adjust at that level too.
By freeing up more of your income, you can fund your savings account, so you have the cash to cover unexpected expenses and various financial goals.
Frequently Asked Questions
What are the best budget types for beginners?
With so many budgeting methods, what should you consider as a beginner?
Most people prefer zero-based budgeting because you give every dollar you earn a purpose.
Another budgeting option is the 50/30/20 rule.
This is a favorite of many because you don’t get lost in the details.
Create three primary buckets for your money and assign your spending and savings to one.
Finally, flexible budgeting allows for a lot of freedom for those whose income varies as your income changes from month to month.
- Read now: Here is how to avoid lifestyle creep
Can I still use credit or debit cards when budgeting?
You can use a credit card or debit card for any of the budgeting techniques listed.
However, using credit cards will make the process more difficult.
This is because sometimes it takes a day or two for a charge to post, which means you could overspend if you are not careful.
You won’t run into this problem using a debit card since these post quicker, and the money comes directly from your checking account.
So unless you stay on top of your spending plan, credit cards should not be used.
Will following a budget improve my credit score?
Budgeting your money will help you improve your credit score and your credit report.
This is because if you follow your budget, you won’t overspend and end up in debt.
If you are in debt, using one of the budgeting methods will help you to make debt repayment a priority.
By paying off your debt quickly, you will raise your credit score, allowing you to save money when you have to take out a loan.
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 budgeting method that works best for you.
Just be open to the fact that the one you think is right for you might not be right, and you will have to try again.
As I mentioned earlier, I had to try four budgets before I found the one that worked for us.
The key is not to get frustrated and give up but be open to the idea that you are getting closer to finding the fit for you.
If you can do this, you will improve your financial situation.
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I have over 15 years experience in the financial services industry and 20 years investing in the stock market. I have both my undergrad and graduate degrees in Finance, and am FINRA Series 65 licensed and have a Certificate in Financial Planning.
Visit my About Me page to learn more about me and why I am your trusted personal finance expert.