Top 7 Proven Budgeting Methods (Your Perfect Fit is Here!)


Finding the best budgeting method for you; one that you’ll actually stick to! – Part Three in Your Ultimate Guide on How to Budget Series

Author: Kari Lorz, Certified Financial Education Instructor

Author: Kari Lorz – Certified Financial Education Instructor

This is Your Ultimate Guide on How to Budget Series. Where Iay out every single thing that you need to know to successfully budget your money! No more guessing or wondering if you’re doing it “right”, after following along you will be 100% certain about what you need to do to organize your money!

Part One: The Essential First Step with Budget Planning (it’s a must-do!)
–  Part Two: The Best Budgeting Tips for Beginners (That You Have to Know)!
– Part Three: The Top 7 Proven Budgeting Methods – Your Perfect Fit is in Here!
Part Four: Yes! Budgeting Can Actually Be Easy (With a Better Budget)
– Part Five: The 10 Most Common (and Costly) Budgeting Challenges That You Will Face (and How to Fix Them)

One of the things that gets confusing with budgeting is that each guru has their own method, claiming it to be the magic formula for success.

If you’ve read Parts 1 & 2 of this series, you’ll know the “magic” of succeeding with budgeting is getting your head on straight, having clear goals, and being 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. Today, we’re going to go through the top budgeting methods and find the perfect fit for your lifestyle and your goals!

different budgeting methods

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1. The 50/30/20 budgeting method

The 50/30/20 budgeting process is probably one of the least detailed in that you don’t track nearly as much as with the other methods. It’s basically just 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, the rule of thumb is that you should be spending…

Needs – 50%

  • housing
  • utilities
  • insurance
  • debt repayment
  • 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 goal to be 20%! It’s a great goal to have, but one you will need to work towards slowly (but not too slowly). The rule of thumb for saving is to start at whatever employer match amount you get, and then work up to 10% over time, ideally getting to 15%, and then 20%.

Yet, if you’re a FIRE follower (financial independence retire early), then you should aim to save 50-70% of your income.

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 who are impulse shoppers, as individual categories aren’t broken down, so there’s room for interpretation of where their money can go.

If this budgeting method is for you, then be sure to snag the 50/30/20 Printable Budget Planner! It has all the tools you need to get started with your monthly budget today!

50/30/20 budget printable budget planner pages

If you like this budgeting style but aren’t sure the budget percentages fit your needs & financial goals, then you can try the 70/20/10 budgeting method instead. Or even the 30/30/30/10 budgeting method.

2. Zero based budgeting method

It’s also known as the zero sum budget method, and it is a favorite among people (especially the money guru Dave Ramsey). This is 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 the least important. So home/food/insurance should go at the top, and Hulu should be down at the bottom. Because if you run out of money before the end of the month, you cut out the bottom expenses.

Who is this budgeting method good for

  • Those who really want to know where each and every dollar is going!
  • People who want to be very strategic with their spending
  • Those who 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 who can get easily overwhelmed by lots of details
  • For 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 personal budget worksheets to dive deep and create financial goals & plans if you want to really get a handle on your personal finances!

I have been using this budgeting technique and framework for the past four years, and it has enabled my family to crush our money goals! To see the full walkthrough of this budgeting method, check out how to fill out your zero-based budgeting template.

If this budgeting method is for you then be sure to snag the Zero Based Budget Planner. It has all the tools you need to get started with your monthly budget today!

zero based budget printable budget planner

3. Cash envelope budgeting method

The cash envelope budgeting system is by far one of the hottest personal budget methods around, yet it requires the most budget preparation out of all the budgeting choices!

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
  • clothes
  • gas
  • fun money/date night


You can do the cash envelope 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. Or you can use a cashless spending tracker to make it super easy.

If this budgeting method is for you then be sure to snag the Cash Envelope Budget Planner. It has all the tools you need to get started with your monthly budget today!

Who is the envelope budget method good for?

  • People who are very tactile and like to touch things to get 100% clarity.
  • People who easily overspend (once the envelope is empty then no more shopping).
  • People who want to get a good budgeting process down before they jump into using credit cards.

Who is the cash envelope budget method not good for?

  • People who want to earn credit card rewards
  • People who easily lose things (like cash envelopes)

4. Pay yourself first budgeting method

This can be a budgeting method on its own or can be a tactic inside of another budgeting method or on its own. You may have heard it called reverse budgeting. 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 point in their budget system

A Pay Yourself First budgeting strategy is when you get paid, and the very first thing you do with that money is to set aside, in a savings account or in a cash envelope, 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 who have very ambitious savings goals on an irregular income
  • Those who 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 templates

How I use the reverse budget for our cash flow plan:

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 sinking funds 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.  

5. The half payment budgeting 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 who 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 who 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 who 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.

6. The budget by paycheck method

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.

(Use a budget calendar for this method as it’s a lot easier to comprehend it when you can see it laid out).

With this bi weekly 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 (that gives wiggle room 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. So if the gas company said 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 of 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 who are organized
  • Those who 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 

If this budgeting method is for you, then be sure to snag the Budget by Paycheck Planner. It has all the tools you need to get started with your monthly budget today!

budget by paycheck printable budget planner pages

7. Priority based budget (budgeting on a low income)

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

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?

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!

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.

The general rule of thumb for budget percentages:

Budgeting Percentage Guidelines
  • 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, and only 3% to your financial goal of saving for a house then 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!)

If you already know what works for you then great! Check out the printable budget planners that can save you tons of time & frustration (by using a proven template!)

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!

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Traditional Budget 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.    

Just for clarity’s sake let’s review the key components of every budget…

  • income
  • fixed expenses – the dollar amount doesn’t change (i.e. car insurance)
  • variable expense – the dollar amount changes from month to month (i.e. electricity bill)
  • necessary expense – you have to spend this no matter what (i.e. rent, groceries, insurance)
  • spending category (i.e. housing, food, etc)
  • discretionary spending – for you to spend on whatever you want
  • debt repayment – money you owe (i.e. student loan, credit card debt, etc)
  • savings – money you want to set aside for future use (either planned or unplanned such as emergency fund, car repair, vacation fund, etc)

In the budgeting methods below each of these components can be of different importance, broken up into smaller pieces, gotten rid of altogether, etc. So all budgets have the same pieces just arranged differently. Let’s go through the top seven successful budgeting methods and see which is your best fit.

At the end of the day

There are so many different types of 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!

free budgeting templates signup

This is Your Ultimate Guide on How to Budget Series. Where Iay out every single thing that you need to know to successfully budget your money! No more guessing or wondering if you’re doing it “right”, after following along you will be 100% certain about what you need to do to organize your money!

Part One: The Essential First Step with Budget Planning (it’s a must-do!)
–  Part Two: The Best Budgeting Tips for Beginners (That You Have to Know)!
– Part Three: The Top 7 Proven Budgeting Methods – Your Perfect Fit is in Here!
Part Four: Yes! Budgeting Can Actually Be Easy (With a Better Budget)
– Part Five: The 10 Most Common (and Costly) Budgeting Challenges That You Will Face (and How to Fix Them)

Which budgeting method is right for you?

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  1. Hi Kari, Amazing post. I also seriously keep track of finances by myself but sometimes face difficulties too. Hope this free template made by you will help me resolve my issues. Will definitely let you know the results. Thanks for sharing šŸ™‚

  2. I had no idea there were so many budgeting methods! While I thought the zero-based budgeting method was what we did, I also learned that we do priority-based as well with irregular income. This series has so much helpful information!

  3. This is such great info! Budgeting always seems like so much work that it gives me a headache and then I forget about it. I really like this 50/30/20 idea. That’s something I can manage and stay consistent with! Super helpful!

  4. This is such a great and detailed budgeting post. I love the split outs by where you spend your money. Housing definitely takes up a lot in the budget.

  5. Thank you for doing the heavy lifting here and sharing all different methods. I’ve found that we’ve had to change methods over time due to changing income with jobs, maternity leave etc. At the end of the day, paying attention to your budget is what’s key.

  6. Loved reading this post I am definitely bookmarking this page. I use the pay yourself strategy and found it very effective for wealth creation. Thanks for sharing such a detailed post!

  7. I like that you laid out the percentages – and I think 25% is a great % for housing. You don’t want to be house poor!

  8. This is a great guide to different budgeting methods. I use the 50/30/20 method but in reverse — I live on 20% of my income, put 30% aside for self-employment taxes and save the rest. The half-payment budget method I was not familiar with but it sounds like a good option if you’re disciplined enough to set aside the money you need for bills and not spend it.

      1. This is great information. It took you a lot of work. It is so hard to budget when your self employed and freelance varies all the time.