Finding the best budgeting method for you; one that you’ll actually stick to!

This is part #3 in a 5-part series. Your Ultimate Guide on How to Budget. Each week I will release a new chapter in this series, and by the end, you will know how you can finally be successful at budgeting!

Part One: What You Have to do When You are Planing on Starting a Budget
Part Two: Budgeting Beginner? Here are 10 tips that you HAVE TO know!
– Part Three: The Top 7 Proven Budgeting Methods (you’re here)
– Part Four: It’s a Better Budget
– Part Five: The 10 Budgeting Mistakes You Don’t Want to be Making

One of the things that mess people up with budgeting is that each guru has their own method, claiming it to be the magic formula for success. If you’ve read part one and part two of this series the “magic” of succeeding with budgeting is getting your head on straight, having clear goals, and be ready to be flexible! That’s the magic.  

So why are there so many different budgeting methods, each claiming to be the best? Because we are all “individuals!” what works for me may not work that great for you, and vice versa. Yes, each budgeting method will bring greater awareness to how you spend your money which is a good thing, so any budgeting is better than hedonistic money free for all!  

Ultimate Guide on How to Budget Part Three - budgeting methods

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Budgeting Base Line

Many people want to know what is “normal” for people to spend on things, which is a natural instinct. This is how we learn; we observe others and maybe try it ourselves.    

There are a few different generally accepted budgeting percentages that people go off of.

The general rule of thumb for budget percentages:

Budgeting Percentage Guidelines

Detailed budget recommended percentages:

  • Housing 25%
  • Insurance 10 – 25%
  • Food 10-15%
  • Giving 10%
  • Saving 10%
  • Transportation 10%
  • Utilities 5-10%
  • Health 5-10%
  • Recreation 5-10%
  • Personal Spending 5-10%
  • Misc 5-10%

Again, these are just general places to start, and you don’t have to follow these percentages, but they are the Dave Ramsey recommended percentages. They should just get you thinking if you need to relook at some of your spending categories and make adjustments. For example, if 30% of your take-home pay is going to your car payment, we might need to have a talk.

Don’t forget to set yourself up for success by getting the best tools to help you budget! “The best” should be classified by what is best for you and your situation. (aka what you will be most consistent in using!)

Or if you just need some budgeting forms to keep your organized then check out your choices here.

Now that you know the general framework for allocating your money, let’s go through the main different budgeting methods, and you will hopefully find the best budgeting method for you!

The 50/30/20 Budgeting Method

50-30-30 Budgeting Method

This method is probably one of the least detailed, in that you don’t track nearly as much as with the other methods. Basically giving you guidelines on what percent of your after-tax money (aka take-home pay), should be going to these main expense areas. With this method, you should be spending…

Needs – 50%

  • housing
  • utilities
  • insurance
  • debt minimum payments
  • food

Wants – 30%

  • subscriptions
  • gym
  • eating out
  • clothes

Savings – 20%

  • 401(k)
  • IRA
  • emergency fund

I particularly like this one in that it lists your savings to be 20%! It’s a great goal to have, but one you will need to work towards slowly (but not too slowly).

Who is this budgeting method good for

  • Those that aren’t as disciplined with tracking things but can stay the course reasonably well.  
  • People who get overwhelmed with lots of small details, with this method there are only three categories, easy enough!
  • This is an excellent budgeting method to start with as you get up and running faster & easier!

Who is this not good for

  • Those that like to be 100% certain they are on track, as this budget leaves wiggle room
  • Those that are impulse shoppers, as individual categories aren’t broken down, so there’s room for interpretation of where their money can go.

Zero Based Budgeting Method

Zero-Based Budgeting method

This method is a favorite among people (especially the money guru Dave Ramsey). This is the method where you give every single dollar a purpose in your money plan! You start with your take-home pay, and then you budget down each individual category until you have $0 left.

It’s best to start this budgeting method with the most necessary expenses first and then work your way down to least important. So home/food/insurance should go at the top, and Hulu should be down at the bottom. Because if you run out money before the end of the month, you cut out the bottom expenses.

Who is this budgeting method good for

  • Those that really want to know where each and every dollar is going!
  • People that want to be very strategic with their spending
  • Those that lose focus with too much wiggle room, or quickly forget what money is for what purpose.

Who is this not good for

  • Those that don’t have a lot of time
  • People that can get easily overwhelmed by lots of details
  • Those with variable incomes, if your monthly income changes, it may be hard to nail down exact numbers.

How to execute the zero-based budgeting method

I have created a super easy and straightforward one-page budgeting template. It also has some accompanying budget worksheets to dive seep and create money goals & plans if you want to really get a handle on your money!

I have been using this method and framework for the past four years, and it has enabled my family to crush our money goals!

Cash Envelopes:

This is by far one of the hottest budgeting tactics around! You essentially take all of your available cash out of the bank for expenses that you would typically pay debit/credit/cash with. Then you divvy up the money into different category envelopes, such as

  • groceries
  • eating out
  • clothes
  • gas
  • fun money/date night


You can do this method with credit cards (this is how I do zero-based budgeting). Yet, if I want to know how much money I have left, I need to open my excel doc and see. Usually, I always know where I am at for spending, as I log my receipts every few days.

Pay Yourself First Budgeting Method

Pay Yourself First budgeting method

This can be a budgeting method on its own or can be a tactic inside of another budgeting method. Tactics are “an action or strategy carefully planned to achieve a specific end.”

For example, I personally use this tactic inside my zero-based budget, but for others, this may be their only reason for budgeting.

RELATED: Paying Yourself First – The Most Important Strategy to Help You Build Wealth – that hardly anyone does!

A Pay Yourself First budget is when you get paid, and the very first thing you do with that money is to set aside some of it for your own personal savings goals (either a dollar amount or a % of pay). Then the rest of yours to do as you wish with.  

Who is this budgeting method good for

  • Those whose main money goal is saving money, usually a specific reason – a house, a new car, retirement, etc.
  • Those who don’t want to spend time tracking expenses and small details

Who is this not good for

  • Those that have very ambitious savings goals on an irregular income
  • Those that spend without planning. If you spend everything on clothes in the first half of the month, then there’s no money left to cover regular expenses. (you’ve taken away your cushion by saving it first thing).

Do not save what is left after spending, but spend what is left after saving.

Warren Buffett

free budgeting worksheets

How I use this method:

Our pay comes into our bank account at the end of the month, and out of that pay comes our retirement plan contributions (10%). Then on the 4th of the following month (I allow a few days in case there’s a weekend in there which may hold up funds), I have auto deductions set up that sends money directly to different accounts…

  • house sinking fund
  • car sinking fund
  • kiddo sinking fund
  • vacation sinking fund
  • husbands personal savings
  • my personal savings

Each of these funds is a different banking account under our big main account. I know it may seem confusing to have so many bank accounts, but it really makes things so much easier. There is never any confusion about what the money is for, or how much we have to spend on purchases. For example, if I opened my banking info now, I could see that we have $xyz dollars available to buy a kitchen table out of the house fund.

We are basically saving ahead for purchases, which makes things a lot easier to swallow when your mechanic says you need to spend $400 on a random part for your car. No worries, the money is already there, waiting for this exact unexpected expense.  

RELATED: Sinking Funds – the Smartest Strategy to Saving HUGE Stacks of Money!

The Half Payment Budgeting Method

Half Payment Budget Method

One of the chief complaints that people have is that they get their paycheck, and all of it is immediately gone on bills. Poof! It’s gone! Ugh!  

With this budgeting method, you take your monthly bills (mortgage/rent, utilities/insurance, all of those must pay ones) and you set aside half the amount of the bill with each paycheck. Then when the bill is due, you have the full amount ready.

For example: If your electric bill is $90 every month, you save $45 from one paycheck and then with the next paycheck you save the other $45, and then you pay that bill with the whole $90.

Who is this budgeting method good for

  • Those that get paid bi-weekly
  • People who have great discipline, and won’t touch the half saved amounts of money and use it for something else
  • Those that always feel behind on bills

Who is this not good for

  • Those who may not be as organized as they like. With this method, the different dollar amounts and the holding of money can get confusing if not carefully tracked and labeled. 
  • Those that see a lot of money in envelopes or accounts and think it’s open shopping season.  

Note:  you need to be a half a month ahead for this budgeting method to work, so you will need to spend a bit of time ramping up some savings to preload some funds.

The Budget By Paycheck Method

the budget by paycheck budgeting system

This is similar to the half payment method in that you are breaking things up according to bills, but here you are splitting up the bills as to when they are due.

Let’s say you have the following bills…

  • mortgage, $1000 due on the 1st
  • HOA, $40 due on the 4th
  • electric, $90 due on the 10th
  • cable, $70 due on the 1st
  • credit card, $40 (minimum payment) due on the 8th
  • daycare, $600 due on the 1st

You can see how all your bills are front-loaded in the month, which can be totally depressing as once you get your paycheck all of it is immediately gone. Leaving a lot of month left for unplanned expenses to pop up with no money to cover it. So it makes sense to break up your bills into two payment time frames.

With this budgeting method, you call your lenders and see if you can change your payment due date. If you get paid twice a month, ideally you’d have some bills due the 1st of the month and then the rest due 2.5 weeks later (i.e., 20th, that gives wiggle from for weekends which are non-business days where money could get held up in the “transferring” phase).

I have called most of my lenders at some point in time and asked to change due dates, and most are flexible, yet a few told me they couldn’t adjust. That’s okay I just planned around those bills as a base date. So if the gas company they had to be paid by the 6th, then I scheduled all of the first half of the monthly bills around that date. They all don’t have to be on that exact date, just somewhere within a few days of that to keep them grouped together.

A portion of each paycheck goes to bills, and then the other part is for living expenses – food, gas, etc.

The easiest way to do this method is to get a good old fashioned calendar and write out your pay dates and due dates, then color code which bill gets paid by which paycheck.

Another aspect with budgeting by paycheck is keeping your bills organized! You need to know which bills…

  • are on auto-pay
  • emailed to you
  • paper copies mailed to you
  • ones that are every other month
  • ones that are to be paid by check only

Who is this budgeting method good for

  • Those that are organized
  • Those that get paid a fairly regular income

Who is this not good for

  • Those who don’t like to track things
  • Those who get paid once a month 

Priority Based Budgeting Method (irregular Income & low income)

budgeting method: priority based budget

This method will look familiar, as most budgets contain the same ingredients, they just focus on different amounts and when to use it.  

This budget method is for those who have an irregular income. The first step is figuring out your rock bottom take-home pay. This is your worst-case scenario income. 

You list your expenses with the highest priority one being first (see the similarities to other budgeting methods?). So most likely your housing, then next on the priority list would most likely be utilities, then insurance, then basic groceries. Ideally, your rock bottom income would cover these things at the least. You continue to list out your expenses all the way down to the bottom of what you want, and then add in some if you get more pay.

Let’s say you pick up an extra day at work, which is an additional $73 in take-home pay. So now you go down your priority list of expenses to add-in, things like funding your emergency fund, or extra groceries, a meal out, clothes, etc.

People who have irregular incomes may want to consider a cushion account. This is where if they have a high-income month, they set aside money to cover the next month’s bills in case the next month’s income is lower than expected (aka they called out sick to work, hours got cut, etc.). This is different than emergency funds and should be kept separate.

Who is this budgeting method good for

  • Those with irregular incomes
  • Those with lower incomes

Who is this not good for

  • This method isn’t “bad” for anyone; it just may not be needed.

Budgeting on a Low Income Method

How do you know if you’re considered a low-income worker? The latest US Census (2017) recorded that 12.3% of the US population fell below that mark, that may not sound like much, but it means that almost 40 million people earn below the poverty line! Which the Federal Government has laid out is below $24,600 for a family of four (source), where children are the ones mainly affected, being 21.2% of those classified as being under the poverty line (source)  

This one is very similar to the irregular income in that you make a priority-based spending plan. Shelter/utilities/basic food/transportation come first. Again, ideally, your paycheck covers these top priorities.

The leftover portion of your income you break down into a weekly/daily spending allotment. Let’s say after your basics are covered, and you have $379 leftover. That’s…

  • $379 / 4.33 weeks in a month = $87.53 a week to spend
  • $379 / 30 days in a month =$12.63 a day to spend

This budget can either be really easy or really hard. Easy in that is simple and straightforward. If you spend $34.67 at the grocery store one day, you know that’s 2.75 days worth of spending. You can’t buy anything else until almost three days later.

It’s hard because people don’t shop “per day” usually, and it’s a low amount. Looking at your budget this way can be disheartening, and I feel you. Feeling like there is no hope, or way out of a bad situation is the worst. In cases like these, you need to stop, breathe, and look for help, and above all don’t ever give up on yourself! There is a way to rise above; you may just need help finding it.

At the End of the Day

There are so many different budgeting methods out there; you just need to see which one is the best budget for you. Once you pick a method, you need to give it a three-month trial run. By all means, tweak and adjust as needed with the small details. If by then you find it’s not working, then absolutely try a different budgeting method.  

This may sound counter-intuitive, but I want you to budget so well, and become such a ninja with your money that you forget when payday is. Imagine that, managing your money so well that it doesn’t really matter the date that the money hits your bank account.  That sounds like freedom, and that’s what I want for you!

Next week, in part four of Your Ultimate Guide on How to Budget,  I’ll be taking you through the exact budgeting method that I have used these past four years. I have taken the best pieces from some of the budgeting methods we talked about in this post and put them together in a simple & straightforward one-page spending plan. I have framed it up in a way so that you are deeply connected to the outcomes, and thus more supported and driven to succeed. Honestly, this method is amazing, and I am so excited to share it with you!

free budgeting worksheets

Which budgeting method is right for you?