It’s an awful feeling to wonder where all your money went at the end of the month. Even worse is wondering how all your money is gone when you still have a week left until payday.
If you added up some receipts, you might be flabbergasted by how much you spend on food, clothes or your kids’ activities. On the other hand, if you never take a hard look at your spending, you could keep coming to the end of the month with that awful (and broke) feeling.
A budget can help. Budgets are designed to keep you on top of the money that comes in and the money that goes out.
But there isn’t just one way to budget money. Budgeting styles vary considerably. What works for you will depend on your goals and how you prefer to track your finances. We’ll explain how nine popular budgeting methods work.
- 50/30/20 method
- Zero-based budget
- Bare-bones budgeting
- 60% solution
- Paycheck budgeting
- Calendar budget
- Half payment method
- Kakeibo
- Pay yourself first method
Why Is Budgeting Important?
No matter where you’re at in your personal finance journey, finding a budgeting method that works is key to realizing your financial goals. Budgets are much more than income minus expenses. The budgeting process helps you get a handle not just on how you’re spending money, but also on the reasons you’re failing to save money and if your spending and saving aligns with your goals.
So if your savings account bottoms out to zero on a regular basis or you’re struggling to make car payments, choosing a budgeting method is a good step toward getting your finances back on track.
Which Budgeting Method Is Right for You?
Before diving into the details of each budgeting method, let’s start with how to choose which approach is right for you. Not all budgeting methods are created equal and every financial planning process is different. This decision is partly your preference but also what your current finances dictate.
You can also combine these methods to personalize a budgeting approach that best meets your immediate financial needs, then switch to a more flexible method you can maintain long term.
9 Popular Budgeting Methods
| Your Priority or Preference | Budgeting Method Match |
|---|---|
| In financial crisis or debt repayment | Bare bones or zero-based budgeting |
| Curb impulse spending | Zero-based budgeting, cash envelope system |
| Have regular income or fixed expenses | 50/30/20 or zero-based budgeting |
| Prioritize savings | 60% solution or pay yourself first method |
| Paid bimonthly or variable expenses | Paycheck budgeting or half payment method |
| Prefer pen and paper or visual reminders | Calendar budget or kakeibo |
| Prefer flexible budgeting methods | 60% solution or pay yourself first method |
9 Budgeting Methods to Manage Your Money
Let’s break down some popular budgeting methods, so you can choose one that’s right for you.
1. The 50/30/20 Method
Have you ever asked yourself how much you should be spending on necessities as opposed to the stuff you want? Have you wondered what portion of your paycheck should be going to better your financial future? The 50/30/20 budget might be right for you.
How to Budget Using the 50/30/20 Method
Divvy up your money so that 50% of your income goes to covering the essentials, 30% goes to buying what you really enjoy and 20% goes to meeting financial goals.
Let’s say your take-home pay is $3,000 per month. That breaks down to $1,500 for the essentials, $900 for whatever you desire and $600 for financial goals.
Some of the necessities you’d spend $1,500 on could include:
- Rent/mortgage
- Insurance
- Utilities, internet, phone
- Debt payments (car, student loans, credit cards)
- Food
- Gas
You should allocate $900 to spend on the fun stuff:
- Subscriptions (Hulu, Netflix, gym, magazines, etc.)
- Going out (restaurants, date nights, movies, concerts, sporting events)
- Personal care (clothing, accessories, makeup)
- Vacations
That leaves you with $600 to put toward things like:
With the 50/30/20 method, you don’t have to lay out how much you’ll spend in individual categories. For instance, you don’t need to set a spending limit on groceries or a cap on how much you spend on date nights as long as your spending stays within the established percentage brackets.
If you like the idea of the 50/30/20 method but can’t stick to those exact percentages, you can also tweak the numbers a bit. For example, you might choose to spend 60% on essentials, save 20% and spend 20% on fun stuff.
Is the 50/30/20 Method Right for You?
This method is a great fit for people who need guidance on balancing saving, investing and repaying debt.
If you tend to go overboard with your discretionary spending, this budget will keep you in line without making you feel like you have to sacrifice the things you want.
After all, 30% is a pretty generous allotment for fun money.
2. The Zero-Based Budget
Type A folks, rejoice. The zero-based budget lays out a plan for every dollar you make, putting you in control of it all.
How to Budget Using the Zero-Based Budget
The goal is to make sure your monthly income minus your monthly expenses — including allocations like putting money in savings or investment accounts — equals zero. There should be no money left over at the end of the month and no spending more than you bring in.
To get started, analyze your bank statements, credit card statements and receipts from the past few months to get a sense of how much you spend in the budget categories that apply to your life.
Next, assign a spending limit to each of those budget categories. You may need to play around with the numbers a bit until the amount of money you have going out equals the amount of money you have coming in.
Here’s an example of what your budget might look like on a $3,000 monthly income.
Expenses
$900 — Rent
$300 — Utilities, phone, internet:
$550 — Debt (student loans, credit card, car)
$150 — Insurance
$450 — Food (groceries and eating out)
$100 — Gas
$100 — Entertainment
$50 — Gifts
$100 — Personal care items
$65 — Subscriptions (gym, streaming)
$15 — Cleaning supplies
$70 — Clothing
$150 — Savings
$3,000
Is a Zero-Based Budget Right for You?
The zero-based budget is perfect for budgeters who want to be intentional about every dollar. It’ll help you become hyper aware of your finances.
This budget may even tip you off to where your financial problems lie — whether you’re simply not making enough money or you’re spending too much in a certain category.
3. Bare-Bones Budgeting
Sometimes, you just gotta trim all the fat from your budget and focus on the basics with a bare-bones budget. It’s not deprivation. It’s discipline.
How to Budget Using Bare-Bones Budgeting
This budgeting method is pretty self-explanatory. With a bare-bones budget, you cover only the expenses that are absolutely necessary. Whatever is left over, you save.
Your budget might look something like this with a $3,000 monthly income:
Expenses
$900 — Rent
$300 — Utilities, phone bill, internet
$550 — Debt (student loans, credit card, car)
$150 — Insurance
$300 — Groceries
$100 — Gas
$700 — Savings
$3,000
Is Bare-Bones Budgeting Right for You?
The bare-bones method is helpful for budgeters who are really looking to bulk up their savings — or perhaps aggressively pay down debt.
The bare-bones method can help anyone needing a spending reset. It can also be helpful to those trying to manage their money on a lower income or those with a ton of essential expenses to account for.
4. 60% Solution
Sure, it’s smart to prioritize the essentials. But what about those expenses that aren’t vital but that we consider very important to our lives? The 60% solution gives value to that type of spending.
How to Budget Using the 60% Solution
This budgeting method is similar to the 50/30/20 method, but the rules are a bit different. With the 60% solution, you’re budgeting 60% of your income on expenses you’re committed to. That includes essential spending plus those expenses that are most important to you, such as your kid’s activities, a personal trainer, dues to a professional organization or monthly road trips to visit loved ones.
As for the other 40% of your income? You can put that toward savings or use some of the money for discretionary spending. Richard Jenkins, the financial author who came up with the 60% solution, split his 40% into four 10% increments: retirement savings, long-term savings, short-term savings and fun money.
Here’s an example of a budget that uses the 60% solution for a $3,000 monthly income:
Committed expenses (60%)
$775 — Rent
$270 — Utilities, phone bill, internet
$175 — Debt (student loan, credit card)
$75 — Insurance
$250 — Groceries
$75 — Gas
$100 — Personal trainer
$80 — Cooking lessons
Other expenses (40%)
$300 — Retirement savings
$300 — Long-term savings
$300 — Short-term savings
$300 — Fun money
$3,000
Is the 60% Solution Right for You?
The 60% solution is great for those who want to prioritize non-essential expenses that they care about. It’s also good for budgeters who want guidance on where their money should be going but don’t want to be too strict about tracking every dollar.
5. Paycheck Budgeting
Most budgets are set up to cover a whole month’s worth of spending. Paycheck budgeting, on the other hand, is when you make separate budgets to cover each individual pay period.
How to Budget Using the Paycheck Budget Method
With a paycheck budget, you focus on planning out how you’ll spend each paycheck, covering all the bills and expenses you’ll incur before your next payday arrives. This budgeting method gives you a better picture of how much discretionary money you have available between paychecks.
If you have several bills due around the same time each month, you might want to ask your service providers if you can change your bill’s due date, so you aren’t spending all the money from one paycheck on bills alone.
Here’s an example of what two paycheck budgets might look like over the course of a month:
Budget No. 1 ($1,500 income)
$900 — Rent
$150 — Utilities
$150 — Groceries
$100 — Gas
$50 — Entertainment
$150 — Savings
Budget No. 2 ($1,500 income)
$150 — Phone bill, internet
$550 — Debt (student loan, credit card, car)
$150 — Insurance
$150 — Groceries
$50 — Gas
$200 — Entertainment
$50 — Gym membership
$100 — Savings
$100 — Investing
Is Paychecking Budgeting Right for You?
If you live paycheck-to-paycheck, this is a good money-management system because each budget only focuses on the money you currently have on hand. This is also a good budgeting method for those who prefer to focus on how they’ll spend their income as it comes in, rather than making one plan at the beginning of the month.
6. The Calendar Budget
You probably already use a calendar to keep track of upcoming events and appointments. Why not use it to keep tabs on your financial life as well? A calendar budget you’ll stay on top of all your bills and other anticipated spending.
How to Budget Using a Calendar Budget
A calendar budget is pretty simple. Using your calendar of choice — whether it’s an app on your phone or one that hangs on the wall — you’ll mark down your paydays (including the amount you’ll get paid) and all upcoming expenses (such as bills, doctor’s appointments and scheduled car maintenance).
You don’t necessarily have to plan out variable spending, like when you’ll buy groceries or fill up your gas tank. You can take note of those expenses on the calendar as they occur.
Keep a running daily balance so you’ll always know where your finances stand on any given day. You could also choose to keep a running balance of each budget category so you can stay aware of how much you’re spending on certain things.
You should get yourself in the habit of updating your budget calendar every day, though you should only have to spend more than five minutes a day doing so.
Is Calendar Budgeting Right for You?
The calendar budget is great for those who want to start budgeting without having to get used to a new tool or system or spreadsheet. Chances are, you already use a calendar in some capacity.
It’s also a helpful budgeting method for people who tend to forget about due dates or upcoming events that end up costing you money. If you’ve ever tried to budget only to overspend because you didn’t factor in a gift for your mom’s birthday, you might want to consider calendar budgeting.
7. The Half Payment Method
Having to spend a huge chunk of your income on a bunch of bills due at the beginning of the month is a bummer. The half payment method helps spread those expenses evenly.
How to Budget Using the Half Payment Method
With the half payment method, you’ll set aside half the cost of your monthly bills with one paycheck and you’ll use the other check to cover the remaining half. Spreading the cost of your fixed expenses evenly between your paychecks will help reduce your money stress throughout the month.
You’ll ideally have enough money in your bank account to cover a half-month’s worth of expenses before starting this budgeting practice. If not, you can transition into the half payment method slowly, one bill at a time.
Since this budgeting method only focuses on dividing your fixed expenses, any money that’s left over after covering those expenses is your discretionary cash to use for groceries, gas, entertainment and other spending.
Here’s an example of what the half payment method looks like:
Paycheck No. 1: $1,500
$450 — Rent
$150 — Utilities, phone bill, internet
$275 — Debt (student loan, credit card, car)
$75 — Insurance
$25 — Gym membership
$100 — Savings
$425 — Discretionary spending
Paycheck No. 2: $1,500
$450 — Rent
$150 — Utilities, phone bill, internet
$275 — Debt (student loan, credit card, car)
$75 — Insurance
$25 — Gym membership
$100 — Savings
$425 — Discretionary spending
Is the Half Payment Method Right for You?
This method is fitting for people who get paid biweekly or semimonthly. If having an uneven distribution of expenses throughout the month is a problem for you, try the half payment method.
8. Kakeibo
Kakeibo is a century-old money management style from Japan — one that’s still very relevant and useful today.
How to Budget Using Kakeibo
Kakeibo incorporates mindfulness, journaling and minimalism into budgeting.
You’ll start the month off by reflecting on how much money you have available, how much you’d like to save, how much you’re spending and how you’d like to improve your finances. After putting aside savings, you’ll use a journal to track your expenses as they occur.
You’ll group your spending in one of four budget categories:
- Needs (i.e., groceries, clothing and medicine)
- Wants (i.e., gym memberships, dining out and spa services)
- A cultural purchase (i.e., buying books or attending a festival)
- An unexpected/extra expense (i.e., an emergency vet visit or car repairs)
As you spend throughout the month, you’ll also write down why you made each purchase and how it made you feel. Once you reach the end of the month, total up your spending in each category and take time to reflect on how you managed your money and whether your spending aligned with your financial goals.
Is Kakeibo Right for You?
If you want to add an element of mindfulness into your financial life, kakeibo is a good budgeting style to try. This method is also suitable for those who prefer pen-and-paper journaling to spreadsheets and those who want to simplify how they categorize their spending.
9. The Pay Yourself First Method
This particular method is the minimalist approach to budgeting. Pay yourself first — sometimes called reverse budgeting — prioritizes savings and can be used in combination with another strategy like the 50/30/20 budgeting approach.
How to Budget Using the Pay Yourself First Method
The idea behind a pay yourself first budget is pretty simple. Set a realistic goal for savings, retirement or even a sinking fund for a big expense or a vacation. Then you pay yourself — or your savings account — first and then use what’s left in your checking account for expenses and bills or debt payments. The 50/30/20 budgeting method is a more specific version of this approach.
Is Pay Yourself First Right for You?
A flexible budgeting approach like pay yourself first requires you to already have a good handle on expenses and to have realistic savings goals. If you’re still working on figuring out your budgeting “why,” then an approach that focuses on value proposition budgeting like kakeibo or a more meticulous system like the zero-based budgeting method might be a better choice for you.
Bonus Budgeting Hack: The Cash Envelope System
The cash envelope system isn’t technically a budgeting method; it’s a way to carry out a budgeting method. Still, it’s worth mentioning.
If you’ve ever struggled with sticking to a spending limit when you’re grocery shopping, updating your wardrobe or buying gifts, then it could be time to transition to cash.
How to Use the Cash Envelope System
You commit to paying for variable expenses — such as groceries, clothing, entertainment and dining out — with cash.
Step 1: You’ll need to determine how much you can spend in each category. Using a zero-based budget makes this part seamless, because you already know your spending limits in all budget categories.
Step 2: You’ll label envelopes with each spending category and fill them up with their allotted amount of cash.
One envelope might contain $300 for groceries and another might have $100 for entertainment. When you’re out food shopping, you’d spend money from your grocery envelope. If you go to the movies later, you’d pay for the tickets using cash from the entertainment envelope.
Once you’ve used up all the cash in a given envelope, you can’t spend in that category again until it’s time to refill your envelopes with money.
It’s important to note that you won’t use cash envelopes when it comes to fixed expenses. Even bills that tend to vary — like your utility bills — should be exempt. You can automate those bills via online banking or pay them as you normally would.
In addition, your savings allocations should go into the appropriate accounts — not cash envelopes.
Is the Cash Envelope System Right for You?
This system is for those who find themselves swiping their debit or credit cards past their budgeted spending limits. By limiting yourself to a finite amount of cash, it’s (almost) impossible to overspend.
Pros and Cons of 9 Budget Methods
| Budgeting Method | Pros | Cons |
|---|---|---|
| 50/30/20 | • Flexible & adjustable • Good for beginners | • Difficult for variable or higher living expenses |
| Zero-based | • Helps assess finances • Controls spending | • Not for those with irregular income |
| Bare bones | • Pays down debt • Financial reset | • Hard to maintain long term |
| 60% solution | • Focus on savings • Flexible spending | • Not for beginners who need more guidance |
| Paycheck budgeting | • Best for multiple paychecks or variable expenses | • Can encourage living paycheck to paycheck |
| Calendar budget | • Great for visual learners or if you forget bills | • Doesn’t prioritize savings or long-term goals |
| Half payment method | • Best for uneven expenses or bimonthly paychecks | • Requires discipline to split cost and set aside |
| Kakeibo | • Encourages mindfulness • Curbs impulse spending | • Requires pen and paper and daily updates |
| Pay yourself first | • Prioritizes saving • Can be used with other ones | • No expense tracking or check on impulse spending |
Choosing the Best Budgeting Method
Now that you’ve been given an overview of several popular budgeting methods, you should have a good idea of which will work best for your financial life.
When choosing a budgeting method, consider how strict you want to be with your spending. Do you want to track every dollar or take a broad approach to monitoring where your money is going?
Think about your financial priorities. Are you budgeting to increase your savings, or so you can still travel and go out for drinks without damaging your financial standing?
After you choose a budgeting method, think about how you’ll carry out that budget. Will you go old school and break out a pen and paper to write everything down? A budget binder is a great way to keep all your financial info in one place. A bullet journal allows you to add some creativity to the budget process.
If you’d rather have your budget on your smartphone or computer, try creating an Excel budget spreadsheet, making a Google Sheets budget or managing your budget with apps.
You may find that it takes some trial and error to get yourself accustomed to budgeting. You might try out a budgeting method only to decide it’s not for you. And that’s OK. You might prefer another.
Don’t let the budgeting blunders get to you. Keep at it, and eventually, you’ll master this whole money management thing.
Nicole Dow is a former senior writer at The Penny Hoarder. Senior writer Kaz Weida contributed.
