Which Personal Budgeting Method is Best For You

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Congratulations! You’ve taken a huge step in your personal finance journey by trying to find the best personal budgeting method for you. 

And I’m so excited to help you.

There are many different reasons why you may be looking to start budgeting. 

Maybe you’re tired of your money flowing in and out of your life with no real purpose? 

Maybe you’re feeling stress each time a bill comes due?

Or maybe you’re trying to save up for a large purchase?

There are so many different reasons why starting a budget makes sense. But to be honest, there are a lot of different budgeting methods out there and it can be overwhelming when you are first getting started. 

When I first started trying to budget, I struggled to find the right personal budgeting method for me. I ended up quitting and giving up budgeting several times before I found a method that helped me take control of my money

I didn’t know what to look for in a budgeting method when I started. When I wasn’t able to stick to my budget, I just thought I was bad with money.

But that wasn’t true. I wasn’t “bad with money”,  I simply hadn’t found the budgeting method that worked for me and my goals. 

To help you on your journey to finding the best budget for you; here is a list of budgeting methods out there, which type of person may naturally gravitate towards each budgeting method, and the advantages and disadvantages of each method. 

But first, let’s talk briefly about the benefits of budgeting and why this is a huge step in your financial journey. 

What is a Personal Budget?

A personal budget is a way for you to take control of the money that is flowing in and out of your life. It’s a plan that you put together to help you achieve your goals. 

A budget often gets a bad reputation of being restrictive by dictating what you can and can’t spend your money on. 

But when you find the fight budget for you, it won’t feel restrictive. And it will help you feel good about your money and your ability to reach your goals.  

How a Personal Budget Can Help You

There are many ways a personal budget can help you. 

And honestly, I don’t think I understood the complete power of budgeting until I found a method I could stick with. 

Here are just a few ways a personal budget can help you. 

Get out of Debt

A personal budget will help you track your spending and create a plan to get out of debt. 

Getting out of debt is a difficult task, especially if you don’t have a plan that can help you succeed. 

A personal budget is that plan. 

Reach Your Savings Goals

Trying to save up for a large purchase, such as a downpayment on a house, can be a daunting task.

A budget will help you formulate a concrete spending and savings plan to help you reach your savings goals. 

Take Control of Your Money

This is my favorite benefit of budgeting. 

Budgeting helps you feel in control of your money. 

Instead of your money flowing in and out of your life, a budget can help you give your money a purpose.

And when you give your money a purpose, you will feel empowered and more in control of your money and your life

How to Choose a Personal Budgeting Method

Now that you have an idea of why budgeting is a great step towards helping you feel good about your money, how do you figure out which budgeting method is best for you?

Step 1: Determine What Your Biggest Money Problems Are

Before you start testing out budgeting methods, take some time to think about what your biggest money concerns are and what goals you want your money to help you achieve. 

Here are a few questions to get you thinking:

  • Do you want to get out of debt? 
  • Do you want to break the cycle of living paycheck to paycheck? 
  • Do you want to be more purposeful with your money? 
  • Do you want to save up for a large purchase?
  • Do you want to curb impulsive spending?

When you have an idea of what you want a budget to help you accomplish, you can then start looking for a budget to help you get there. 

Step 2: Trial and Error

Knowing what you want out of a budget will help guide you towards a budgeting method that has the best chance at working for you. But to truly determine which method works best for you, you’ll need to test it out.

Don’t be afraid to try a few different budgeting methods out settling on one. And also, don’t be afraid to change your budgeting method if you find that the one you picked is simply not working for you. 

The first budgeting method I picked did not work for me. It took a few tries before I found one that both made sense to me and helped me reach my goals. 

Here is a list of budgeting methods that you can use to help with your personal finance journey. 

Types of Personal Budgeting Methods

Cash Envelope Method

The cash envelope system is one of the most rudimentary methods of budgeting. And likely, the budgeting method used before we had credit cards, spreadsheets, and budgeting apps.

The cash envelope method is just how it sounds. You take a bunch of physical envelopes and assign one envelope to each of your spending categories.

After you receive your paycheck, you cash it and place an allotted amount of cash in each envelope. During this process, you take into account bills that are about to come due or groceries that need to be purchased. 

After you assign money to each envelope, you commit to only spend what is inside the envelope. And if you find you need more than you allotted, you physically have to remove money from another envelope to cover it. 

Who is the Cash Envelope Method Best For 

The Over Spender

The cash envelope method helps to curb overspending because you can physically see how much money you have to spend. And when you spend over that amount, you have to physically take cash from another spending category. 

Actually seeing the trade-off of your overspending is what makes the cash envelope method powerful. Taking money out of another envelope that may contain the cash for a new bike or a vacation might be the motivation to stop overspending in its tracks. 

The Technology Hater

Since the cash envelope method can simply be carried out using a bunch of paper envelopes and cash, this budgeting method is great for someone who doesn’t love using technology. 

Downfalls of Cash Envelope Method

  • The cash envelope method does not allow you to earn credit card points. So if that is a big thing for you, then this method may not be for you. 
  • By having a lot of cash around, your money is a little less secure, and you are more at risk of losing it.
  • Paying bills with cash is hard. You may need to have some of your money in a checking account or accept that you will be charged fees for creating money orders.

If you want to learn more about the cash envelope method check out this in-depth post by The Budget Mom: The Ultimate Guide to the Cash Envelop System

Zero-based Budgeting

Zero-based budgeting is very similar to the cash envelope method, except it doesn’t require you to only use cash.

In a zero-budgeting system, you “give every dollar from your paycheck a job” until you have “zero” dollars unaccounted for. 

This method allows you to be very purposeful with each dollar you earn. Instead of your money sitting in a checking or savings account waiting for a job, a zero-based budget system has you allocate your money to specific jobs as soon as you earn it. It gives your money a purpose right from the get-go. 

Who is it Best For

The Aspiring Money Boss

If you are looking to take control of your money, this is the budget for you. It helps you see exactly where your money is going and helps you plan for all of your goals, both presently and for the future. This budget will help you feel like you are controlling your money instead of your money controlling you.

The Planner

If you prefer to make decisions ahead of time, then this is the budget for you. When every dollar already has a job, you won’t feel the stress of having to make last-minute or impromptu money decisions. 

Downfalls of Zero-based Budgeting Method

  • It’s time-consuming since you have to keep track of all of your spending to know if you are staying within your budget. 
  • It can feel restricting if you don’t allow yourself some wiggle room to move money around when the unexpected occurs. 

If you are interested in learning more about the zero-based budgeting method you can check out two budgeting applications that use this method, You Need a Budget (YNAB) and Every Dollar

Percentage Breakouts: 50/30/20 Budget

The percentage breakout method has you allocate different percentages of your income to your needs, wants, and savings/debt. The frequently recommended breakout is 50% for needs, 30% for wants, and 20% for savings/debt. 

Needs include things like your rent/mortgage, food, clothing, etc. These are expenses you can’t live without. 

Wants are things that you don’t necessarily need but would like to be part of your life. Things like vacations and dining out. Keeping your wants to 30% of your income helps you minimize lifestyle inflation

Allocating 20% of your income to saving or paying down debt helps make sure that you are taking care of your future while also addressing your debt. 

The nice feature of this type of budget is that you can change the percentages as you see fit. If you are trying to save more or pay off a larger amount of debt, you can allocate 30% to savings/debt and only 20% on wants.  

Who is the Percentage Breakout Method Best For

The Beginner Budgeter

The percentage breakout method works well for a person just starting to get a feel for budgeting. It’s a method that isn’t too intimidating in the beginning and is quite easy to implement. 

The Want to Get Out Of Debt Budgeter

If getting out of debt is one of your goals, the percentage breakout method is a great place to start since it commits a portion of your money to getting out of debt. 

The Loosey Goosey Budgeter

Someone who doesn’t want to budget for many different categories could benefit from the minimal guardrails set by the percentage breakdown method. This method has flexibility built into it while still providing some guidelines for where money can be spent. 

Downfall of the Percentage Breakout Budgeting Method

The main downfall of this method is that it’s easy to overspend since you aren’t budgeting for every specific spending category. Someone using this method needs to be aware of their spending habits by tracking their expenditures in the needs and wants categories to make sure they are staying within their percentages. 

Anti-Budget (Pay Yourself First Budget)

The anti-budget is a unique technique for budgeting because there really isn’t that much budgeting involved.  

To implement your anti-budget, you determine how much you want to save. Then whatever amount of money is left over, you get to spend how you please. 

Your savings will include things like retirement, emergency fund, and sinking funds. And once you stash your cash away for those savings goals, you can spend the rest. 

The huge advantage of the anti-budget helps ensure we meet our savings goals. 

Normally we think about saving the money we have left over after all of our spending is complete for the month. And more often than not, we don’t have enough money left at the end of the month to meet our savings goals. This method prevents us from failing to meet our savings goals. 

Who is the Anti-Budget Best For

The Failing Saver

If you want to save more money, this may be the budget for you. By figuring out how much you want to save first, instead of saving what is left over after your spending, you are more likely to meet your savings goals.

Downfall of the Anti-Budgeting Method

Using the anti-budget may be difficult for someone who doesn’t have a good grasp of their current expenses. If you don’t understand how much money you need to live off of, it may be easy to overcommit money to savings and then find yourself overspending.

To learn more about the anti-budget method, and to download a free template, check out The Fioneers post on How they Manage Their Money

The Choose Your Own Budget

This is my favorite budgeting method and the one that I use.

After trying many different budgeting methods, I found that a combination of methods works best for me.

The “choose your own budget” method allows you to mix and match different methods to suit your own financial situation. 

It will take trial and error to figure out which ideas of various budgeting methods resonate with you and how to combine them to fit your own needs. But once you find that sweet spot, your finances will be running on autopilot!

Who is the Choose Your Own Budget Best For

The Rogue Budgeter

If you like to go against the grain and do things differently than everyone else, then thismethod is for you. With this method, you get to do things your way and create a budget that is flexible and fits your needs. 

The Tweaker

If you like to tinker with things until they are exactly the way you want them to be, then this budget is for you. By mixing and matching concepts from different budgeting methods, you will be able to create the perfect budget that is aligned with your money goals. 

Downfall of the Choose Your Own Budget Method

It takes time to learn about the different budgeting methods and what aspects of each of them can help you. Only after trying on several budgeting methods, will you be able to mix and match budgeting methods to suit your needs. It will take time, but patience will be worth it. 

You Got This

When you first start budgeting, it’s going to be overwhelming, and you will struggle at times. 

But the feeling you get when your budget helps you tackle your money goals is well worth the struggle. 

Before you get started, remember to think about what your money goals are and where you typically struggle with money. Use this reflection to help you choose a budgeting method to start with. 

And if that first personal budgeting method doesn’t feel right, then try something else. 

Just don’t give up. There is a budgeting method out there that will work for you. It just may take a while to find it. Or maybe, you may have to create your own. 

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Picture of Melody Creator of Cash for Tacos

Hi! I’m Melody and I want to help you create a vision for your life and provide you the necessary tools to use your money to make your vision a reality. 

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