If you’ve tried budgeting before and it didn’t work, you’re not alone.
What if the failure had nothing to do with you, but had everything to do with the budgeting method you used? What if that was the issue, not you?
Let’s find budget plan that will be your best fit so you can save more money and reach your goals!
I’m going to walk you through the 7 most popular budgeting methods out there, let you know the pros and cons, and help you figure it out.
Let’s start with the first one.
Table of Contents
The Traditional Budgeting Method
When you think about making your budget, the traditional budgeting method comes to mind. It is one of the more popular budgeting strategies.
This is when you allocate a certain spending target to each budget category, housing, transportation, food, shopping, travel, kids, etc.
The idea here is that you pick a pre-determined amount then you stop spending when you are close to that budgeted amount.
Pros of Traditional Budgeting
This method helps you think through every component of your monthly expenses and get granular with where you want your money to go. It also helps you figure out where you typically overspend.
Cons of Traditional Budgeting
Problems arise when you go overbudget in one particular category. Let’s say your food budget is $1,500 and you end up spending $1,600. Where does that extra $100 come from?
People end up moving around the numbers, reducing one category to make up for it. But then they go over in that other category too and have to borrow again.
This is a needless exercise that only creates more work with no benefit.
The 50/30/20 Budget
This budget method has been gaining steam over the last couple of years.
Allocate 50% of your budget to fixed expenses like housing, car payments, debt payments, utilities, insurance, etc. A fixed expense is something that happens every month on the same day and they’re typically the same amount.
Next, allocate 30% of your budget to your wants (aka discretionary expenses). This is the spending you have a little more control over like dining out, travel, shopping, hobbies, kids activities, etc.
The final 20% goes towards building your wealth. This can be savings going towards your financial goals like retirement, college savings, building up your savings account. It can also go towards paying down debt like credit card debt, student loans, personal loans, etc.
Pros of The 50/30/20 Budget
The main reason to make a budget is so that you have more money left over to put towards your financial goals. Th 50/30/20 Method builds in a really strong savings rate of 20%.
It’s works best for people just starting out who are in the middle of a housing decision due to a move.
Cons of The 50/30/20 Budget
If someone already has high fixed expenses due to a large mortgage, auto payment, student loans and other debt, this budget method can’t be used unless they plan on uprooting themselves.
This method also doesn’t work well for people who care more about travel and experiences. They might want to allocate less to the fixed portion and more than 30% to their discretionary expenses.
Also, the 50/30/20 budgeting method isn’t great for the irregular, non-monthly expenses. A fun vacation could take up a big chunk of the wants category for the month which means spending next to nothing when you get back.
The Zero-Based Budget
Zero-based budgeting is when you assign every single dollar a place to go.
This method was is used by budgeting apps like EveryDollar and YNAB (You Need A Budget).
Giving every dollar a job, doesn’t mean spending your entire paycheck. Some money is allocated to your financial goals like investing for retirement, getting out of debt, or building your emergency fund.
Pros of the Zero-Based Budget
It makes you intentional and really think through where you want your money to go. People who use this method like being strategic about how to make the most of their hard-earned paycheck.
Cons of the Zero-Based Budget
I’ll simply ask this question: Have you ever had a month where everything has gone exactly according to plan?
This strategy usually doesn’t work for families or homeowners, because of the variable costs and unforeseen expenses that come from having children or maintaining your house.
Plus, it takes a large amount of time to set up and maintain, because every single dollar needs to be planned for in advance.
Not sure which approach fits your family yet?
That’s totally normal! Budgeting isn’t one size fits all. If you want a shortcut to the right method without trial and error, let’s talk!
Cash Stuffing or The Envelope Method
This envelope system was originally popularized by Dave Ramsey 30 years ago and has since been reinvigorated though social media like TikTok.
You would take cash out of the bank in the amount of your monthly budget, and stuff separate envelopes with the amount for each category.
For example, Are you going out to dinner? Pull money from the “dining out” envelope. When you run out of cash, you’re done until next month.
Pros of Cash Stuffing
Using physical dollars really does make a huge difference when making spending decisions. It is very clear. Similar to the Zero-Based budget method, it also requires strategic planning and thought to get it set up.
You can’t fudge the numbers. The cash you have is the cash you have.
This method works well for older generations and empty nesters who have more predictable expenses.
Cons of Cash Stuffing
It’s not as practical as it was 30 years ago due to online shopping. However some use a hybrid approach by paying with a credit card or debit card then depositing the cash from that envelope back in the bank.
This also takes a lot of time to set up and implement. Plus, you have to go to the ATM which many Gen Zers and Millennials are not inclined to do.
The Reverse Budget aka Pay Yourself First Budget
A common question I get from clients, “How much should we be saving?” My answer, “How rich do you want to be?” It’s a little tongue in cheek but it’s totally true.
To set up your Pay Yourself First Budget, think through your financial goals and figure out how much you want to allocate each month to them. That is where you start.
From there, you build in all of your fixed bills, variable costs, and non-monthly income as desired to create your budget plan.
Pros of Reverse Budgeting
This is one of the better budget methods in my opinion because it prioritizes your savings first.
This works best for people who have low fixed expenses because they can fit their savings goals in much more easily.
This method also works well for savers who are willing to make sacrifices today to prioritize financial freedom tomorrow. These people may also subscribe to the FIRE Movement (Financial Independence, Retire Early).
Cons of Reverse Budgeting
If you’re already stuck with a bunch of fixed expenses, this technique might not be that forgiving or leave a lot to spend on the fun stuff.
Another con of Reverse Budgeting is that it’s easy to eat into the savings portion if you really want to do so. If something unexpected comes up during the month (or if impulse spending creeps in) people will reduce the savings part to cover the expense.
Values Based Budgeting Method
Values Based Budgeting is a method that first starts by identifying your core values then creating your budget that is aligned with those values. Whether it’s health, education, hobbies, events, charity, kids, or something else, those priorities are built into your budget.
This is also a way to align your financial goals with your values, because some of the allocation is to those goals.
Pros of Values Based Budgeting
This is one of my favorite budget methods because it helps you live your best life today. It gives you permission to spend on the things you care about. It also can help you pinpoint the spending that is misaligned but you’re doing it anyway.
This method works best for people who want to lean into their individuality and have causes that they are passionate about.
Cons of Values Based Budgeting
If you have a spouse or partner that doesn’t share your same values and priorities (or isn’t willing to understand them), it can create conflict in your relationship.
Values Based Budgeting can also encourage spending more and saving less since the things you spend on give you great satisfaction. This could lead to a longer runway to reach your financial goals. Spontaneous people would need to build more structure around this.
The MAP Budgeting Method (Make. Adjust. Prioritize.)
Most budget systems fall apart because they expect life to go exactly as planned. However, if you’re reading this, you know that life throws many curveballs at you, good and bad.
Making your budget should only be the beginning. The MAP Method goes further.
As life happens, you Adjust when the unexpected arises, then you Prioritize what the most important things going forward to meet your goals.
Start off by picking your annual spending goal. Then you break it down into three categories:
Fixed monthly expenses (housing payment, car payment, etc)
Non-monthly expenses (aka irregular expenses) like travel, vacations, holidays.
Finally, you fill in your flexible spending, the things you have the most discretion over during the month (food, shopping, clothing, hobbies, stuff for the kids, etc)
Then life happens and you need to Adjust. This method easily helps you update your spending targets and shows you where you can reduce spending without sacrificing. You use your values & Priorities as individuals, as a couple, and as a family to make sure you keep spending in those areas.
There are no rigid guidelines.
If you value having a nice home, that will increase your fixed expenses, leaving you less in the flexible and irregular. If you love traveling and experiences, let the irregular expenses take up a higher percentage of your budget.
Your life, your choices.
Pros of the MAP Budgeting Method
This is a living, breathing budget that can be updated as your year goes on.
Just because one thing goes wrong, doesn’t mean you have to blow the whole thing up.
You don’t need to get caught up with all of those budget categories. We only focus on total spending to keep it simplify the process, so that all it takes is the 5-Minute Weekly Spending Review to keep up with it, good for even the busiest of families.
It helps you figure out which months are going to be more expensive than others, so you can anticipate the big spikes in spending and be prepared for them.
This method takes both of your perspectives into consideration. It has enough structure for the “saver” and enough spontaneity for the “spender”.
Cons of the MAP Budget Method
Like any budget, it might take some motivation to get started. But once we start moving, it is easier than expected to keep it going.
Need budget help?
Stop wasting time on methods that weren’t built for real families.
Imagine having a simple plan that helps you spend smarter, save faster, and argue way less about money – all without spending hours a week budgeting.
That’s what we’ll work on together.
Budget Method FAQs
How do I track my spending?
Although some like the spreadsheet, there’s no reason to do it that way these days. Sign up for a budgeting app that will pull all of your spending data into one place. It saves people hours of time, because you don’t have to compile the information.
No matter which budget plan you choose, use an app to make life easier.
We always seem to spend more than we budgeted. How do we fix that?
The problem is typically one of these three things (or a combination). Fixed costs are too high (above 50% of take home pay), the little things are adding up (shopping, dining out), or you do fine until a major expense comes up like vacation, holidays, home or auto maintenance.
It’s usually best to start by looking at the little things that add up first and see what changes you can make there, because that would be the least disruptive to your lifestyle.
You can also look at your subscriptions and streaming services, negotiate a lower cell phone bill, or cut back on impulse purchases.
Next, take a look at reducing the major expenses that pop up throughout the year to the best of your ability.
How often should we look at our budget?
Every day is too often and once a month is not often enough. Look at it weekly. That’s a digestible amount that will give you a bigger picture view but also help you change course if you are tracking higher or lower than your projected numbers.
How do we stick to our budget?
Budget plans are either too complicated or take too much time to maintain.
Start small by tracking your expenses first. Don’t worry about categorizing or hitting a certain number. Just look at it.
How much time should it take? Set a timer for 5 minutes before you dive in. The most important thing is to build the habit, not make it perfect. The longer your review takes, the less likely you are to stick to it.
How do I pick the budgeting method that is best for my family?
Most families struggle not because they can’t budget, but because they’re trying something that doesn’t actually fit their real priorities, family or busy lives.
I help busy families build simple, personalized spending plans they can actually stick to without giving up what they love most.
Book your free intro call here – let’s find the budgeting method that works best for you