Budgeting comes in all sizes and shapes. But if you’re not able to stick to one, you might be choosing the wrong budgeting method for your needs or simply struggling to find one in the first place.
You might have just started your financial journey or be struggling to budget because of irregular income. The key is to choose the right budgeting method that works well for you.
If you want to start spending wisely and want to live on a budget, here are my top 9 budgeting methods that can help you save more money.
Here’s what we’re going to cover:
3. Envelope Budgeting or Cash-only Budgeting
1. Traditional Budgeting
If you’re someone new to budgeting, you can start with the traditional budgeting method. It is simple and straightforward. In this method, you list all your income sources and expenses, including bills, groceries, and savings goals. Then, you allocate specific amounts to each category. The goal is to make sure you’re not spending more than you earn and to plan for future expenses.
Who can try this method?
Traditional budgeting is great for anyone who wants a straightforward approach to managing their money. It’s especially helpful for people who have a steady income and predictable expenses.
2. 50/30/20 Budgeting Method
I think this is one of the most popular personal finance budgeting methods out there. This method divides your income into three categories: 50% for needs like rent and groceries, 30% for wants like dining out or hobbies, and 20% for savings or paying off debt. It’s a simple way to balance your spending and prioritize your financial goals.
Who can try this method?
The 50/30/20 method works well for those who want a flexible budget that still emphasizes saving and responsible spending. It’s suitable for individuals or families with a moderate income and relatively stable expenses.
3. Envelope Budgeting or Cash-only Budgeting
Envelope budgeting is a tangible way to control spending. You assign specific amounts of cash to different categories, like groceries, rent, or entertainment, and keep each amount in a separate envelope. Once an envelope is empty, you stop spending in that category until the next budgeting period.
Who can try this method?
Envelope budgeting is perfect for those who prefer a hands-on approach to budgeting and find it easier to manage their spending with cash. It’s particularly helpful if you struggle with overspending on credit cards or want to limit discretionary spending.
4. Zero-Based Budgeting
Zero-based budgeting is all about giving every dollar a purpose. You start with your income and allocate it to different categories until you reach zero. This means you’re giving each dollar a job, whether it’s for bills, savings, or fun stuff. It’s a way to make sure you’re not overspending and that every penny is accounted for.
For example, if your monthly income is $3000, you allocate $1500 for rent, $500 for groceries, $300 for savings, and so on until you’ve used up all $3000.
Who can try this method?
Zero-based budgeting is great for anyone who wants to be intentional with their money and ensure they’re making the most of every dollar. It’s especially helpful for people who have irregular incomes or are trying to pay off debt.
5. Kakeibo Budgeting Method
This is one of my favorite budgeting methods. Kakeibo is a Japanese budgeting method that focuses on mindfulness and reflection. Kakeibo translates to “household financial ledger.” In this method, you start by setting saving goals and then tracking every expense meticulously in a journal. Using pen and paper makes you mindful of your expenses. At the end of each month, you review your spending and reflect on how well you stuck to your goals.
If you want to learn more about the Kakeibo budgeting method, you can check out this video.
Who can try this method?
Kakeibo is perfect for those who value mindfulness and reflection in their budgeting process. It’s great if you want to develop better spending habits and have the discipline to track expenses manually.
6. Value-Based Budgeting
Value-based budgeting aligns your spending with your values and priorities. You start by identifying what matters most to you, whether it’s travel, education, or giving back to your community. Then, you allocate your money towards these areas while cutting back on expenses that don’t align with your values.
I have a couple of friends who use this budgeting method. This method gives them a clear picture of what they want and what they don’t.
If you’re a fitness enthusiast like my friend, you can allocate specific money towards gym memberships or healthy food while cutting back on expenses like fine dining out or impulse purchases.
Who can try this method?
Value-based budgeting is ideal for individuals who want their spending to reflect their core values and priorities. It’s great for people who plan to live mindfully. However, if you’re someone who doesn’t have clear priorities yet or spends impulsively, you should avoid this method.
7. Pay Yourself First Budget
With this method, you prioritize saving by setting aside a portion of your income before paying any bills or expenses. This ensures that saving becomes a non-negotiable part of your budget. You can automate this process by setting up automatic transfers to your savings account.
For example, if you earn $4000 per month and want to save 20%, you would transfer $800 to your savings account before budgeting for anything else.
Who can try this method?
The pay-yourself-first method is ideal for anyone who wants to prioritize investing in themselves, saving, and building wealth over time. If you’re someone who struggles with impulse spending or finds it hard to save consistently, you can give this budgeting method a try.
8. Goal-Based Budgeting
Goal-based budgeting focuses on setting specific financial goals and then creating a budget to achieve them. Start by identifying your goals, whether it’s saving for a vacation, buying a house, or paying off debt. Then, you allocate your income towards these goals, adjusting your spending accordingly to make sure you’re on track to reach them.
Who can try this method?
Goal-based budgeting is perfect for anyone who wants to stay motivated and focused on achieving their financial objectives. It’s helpful if you have specific money goals or you get irregular income.
9. No-Budget Method
The no-budget method is all about simplicity and flexibility. Instead of creating a detailed budget, you simply track your spending and adjust as needed. You focus on being mindful of your expenses and making informed decisions about where your money goes, without strict categories or limits.
For instance, you might track your spending using a budgeting app or spreadsheet, categorizing expenses after the fact to see where your money is going.
Who can try this method?
The no-budget method works for someone who has just started their personal budgeting journey. It’s great for people with irregular incomes or fluctuating expenses, as it allows for more flexibility and spontaneity in spending decisions.
To wrap it up!
So, you’ve just explored nine different budgeting methods, each offering its unique approach to managing your money. Whether you’re a parent juggling household expenses, a student navigating tight finances, or simply someone eager to take control of your financial future, I’m sure there’s at least one method that suits your needs.
Remember, budgeting isn’t about restriction; it’s about attaining financial stability. It’s about telling your money where to go instead of wondering where it went. So, take the time to explore these methods, experiment with what works best for you, and adjust them along the way.
Start small, set achievable goals, and celebrate your progress. Whether you’re diligently tracking every penny or taking a more relaxed approach, the important thing is that you’re taking steps toward a healthier financial future.
Hope you like the article and take that first step towards financial freedom.
Good luck with your money management!