How To Choose a Budgeting Method That Works For You

When you are starting your budgeting journey, the sheer number of budgeting methods out there may feel overwhelming. Which one do you choose? The truth is, when you choose a budgeting method, you need to choose one that fits your personality, mindset, lifestyle, and habits. When you are aware of your personality and know what budgeting methods are out there, it makes it much easier to organize your finances and build a stronger financial future.

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Why Your Budget Method Matters

When you start budgeting, there is a lot of trial and error. You find out that what works for others may not work for you. And that is okay!

Your budget needs to reflect your income patterns, your spending behavior, and your financial goals. Picking the wrong budget method can cause a lot of stress and anxiety within your finances, making it easier to lose sight of your bigger picture.

However, when you choose a budgeting method that works for you, you are consistent and motivated on your financial journey.

How To Tell If Your Budget Method Isn’t Working

There are times when a particular budget method just isn’t clicking. Keep in mind that no one ever starts a budget with the intention for it to fail. If your budget is frustrating you, rather than giving you confidence, it is okay to change up your budget method.

Here are some signs to help you recognize if your budget is no longer working for you:

• • Overspending in certain categories
  • Confusion or overwhelm with your current system
  • Feeling anxious when it is time to set up or update your budget
  • Minimal to no progress on your savings goals
  • Forgetting to track expenses
  • Abandoning your budget method after a few weeks

Can I Switch To A Different Budget Method?

Switching to a different budget method does not mean starting from scratch. Sometimes, all that is needed is a slight shift in mindset to make your budget work. Here are some tips that can help you change your budgeting methods:

1. Reflect on what is not working. Is your budget too time-consuming for your lifestyle? Does it need more flexibility? Is it aligning with your values and your goals?
2. Choose a budget method that addresses what isn’t working. After reflecting on what isn’t working, look at what budget methods there are that might solve your issue. If you currently use a percentage-based budget and find it too broad, try a zero-based budget.
3. Test the new method for a short period. Use your old budgeting method for a short period as you test the new one. This doesn’t have to be more than a week or two.
4. Give it time. There will never be a budget that is perfect right away. Allow a minimum of 30 days before you decide if the new method fits your style better.
5. Adjust as needed. Personal finances are personal. There is no one way that a budget needs to be done. You can mix and match from various methods to find something that works just for you and your finances.

An example, from my budget:

When I was still married, the household income went from being paid every week on Fridays to being paid once a month, on the 15th of every month. At the time of the switch, our budget was set up as a monthly budget, using a zero-based budget method.

Everything I had seen online showed me that a monthly budget should be from the 1st of the month until the 31st of the month. But setting up the budget that way just was not working.

We were relying on income that would not be deposited until two weeks into the pay period. Constantly depleting our savings, only to reimburse what was spent on payday, was just the beginning. It was clear that the budget was not working.

One small shift I made was in my mindset from a calendar month to a pay month. While the calendar runs from the 1st to the 31st, our pay month, or budget month, has to go from the 15th of one month until the 14th of the following as shown in the image below. That’s all that changed! It did take a lot of time to get used to the monthly budget not being a clear-cut calendar month, but it worked. And our budget was working for us again!

How To Choose A Budgeting Method That Works?

Below you’ll find some of the most common budgeting methods, along with what individuals that style may work best for. When your budgeting style reflects how you already think about money, you are more likely to succeed within your finances.

Percentage Budget

The percent budget, also known as the 50-30-20 budget, divides your income into percentages based on broad spending categories. The most common is the 50-30-20, which allocates 50% for needs, 30% for wants, and 20% toward debt repayments and savings. This budgeting method is simple and easy to follow since it encourages a balance of spending and saving.

The people who do best with this method prefer their budget to have some structure, but don’t want to micromanage every dollar they earn. It is also great for people focused on creating a manageable way to save money without tracking every expense.

However, this budgeting method does not account for irregular expenses; you will still want to incorporate sinking funds into your budget. It also may not suit individuals who have a variable income.

Zero-Based Budget

This budget method focuses on giving every dollar a job by allocating your income to expenses, debt repayments, and savings until your budget equals zero. It is an extremely detailed and intentional view of your finances. The zero-based budget method also reduces wasteful spending and any overspending that may occur by increasing your awareness of where your money is going.

Due to the detailed aspect of this budget style, it can feel time-consuming and restrictive. It also requires regular updates to ensure you are not overspending, as well as a lot of discipline to stick to your budget.

This method of budgeting is great for individuals who want a detail-oriented overview of their budget for the maximum amount of control over their finances. If you are serious about organizing your finances and want to make sure that every dollar you earn is used wisely, this is the budgeting method for you.

Envelope Budget

If you are a visual learner who struggles with overspending, the envelope budgeting method might help. It uses either physical or digital envelopes to divide your income into spending categories. Once the money in a particular envelope, or category, is gone, you stop spending in that category until you fill it again at a future pay date.

Using a cash envelope budgeting method is great if you want to work on self-discipline, since you can easily see your budget limit. The envelope budget method also encourages more mindful and controlled spending habits. It helps you reduce any unnecessary purchases by preventing impulse purchases without the visual of taking money from a separate category.

However, you might find this method inconvenient if you routinely shop online, or don’t modify it for online purchases and bill payments. You may also find this budget to be too rigid when it comes to expenses that fluctuate throughout the year.

Calendar Budget

The budget calendar method is a great visual way to map out your income, bills, and expenses on a calendar. This strategy helps you plan when your money comes in and goes out, to avoid any cash flow issues. This method is ideal for visual learners since it helps prevent any missed bills or overdraft fees. It also encourages you to think ahead about what expenses are coming up.

The calendar budget method may feel overwhelming to those who don’t like to plan in advance or individuals who don’t like to consistently update their daily expenses. But if you are on an irregular income or working on building consistency within your financial habits, this budgeting method may be the right choice for you.

Paycheck Budget

The paycheck budget method is a flexible budgeting choice for budgeting each paycheck rather than an entire month. It is designed for you to allocate funds for expenses from only the income you received until the next income is received.

This budget method makes it easy to manage a weekly or biweekly income schedule and is an excellent way to help you live within your means. However, it does require frequent updates, and it can be tricky to manage any longer-term expenses since it can be harder to remember your long-term financial picture.

Half-Pay Method

The half-payment budgeting strategy is great for people who are paid twice a month. The initial setup can be overwhelming and time-consuming since it requires that some of your monthly expenses be saved up for before they are due. A benefit of this strategy is that it prevents one entire paycheck from being used up for bills without any remaining funds for other expenses like groceries, fuel, and medical copays.

This budget method gives consistency in what gets set aside from each paycheck, and the security of already having the money to pay a bill in full when it is due. It is great for those who like to prepare in advance, as well as helping to limit your discretionary expenses by saving money, but can be complicated for others.

The Right Budgeting method is…

So, which budgeting method is the right one for you? The answer is the one that helps you grow! When your budget style reflects how you already think about money, you are likely to stick to your budget and see results!

This could be a combination of budgeting methods and strategies, or using just one. You can also change what budgeting method you choose to use as your income, season of life, or financial goals change. There is no one correct answer, other than the method that works for you and helps you achieve your financial goals.

I prefer to use a combination of methods. I use:

• A budgeting calendar to envision the long-term picture, and helps me have enough time to create sinking funds for variable expenses long before the money is due.
• A zero-budget-based paycheck budget to zero out my income from one pay period to another, ensuring that all necessary categories are accounted for, and every dollar has a job.
• Cash envelopes for variable expenses that are necessary, such as groceries, household and pet supplies, while using a digital envelope for fuel expenses for my car.
• And a specific percentage of my income goes toward savings for my financial future.

In the end, the goal isn’t about perfection within your budget; the goal is progress. Whether you are a budgeting beginner or someone looking to improve your personal finances, the right budgeting method will make your budget feel less like a chore and more like an opportunity for your future self.