There just isn’t a one-size-fits-all for budgets. Luckily, there are a variety of different methods of budgeting and a very large (and overwhelming) number of templates for each budget style.
More bad news though – finding the perfect budget style will require some trial and error on your part. But I’m here to help!
Table of Contents
Before You Begin
If you’ve never (successfully) followed a budget, the very first thing you should do is track your expenses. Spend a week (or two or three) keeping track of every single thing you buy. This should be reflective of your regular spending! Don’t try to buy less or “save” money now. Spend what you spend, just keep track of it.
You can keep track on paper with one of the templates below. Or you can use an app (mint.com is popular, I use toshl finance). Whichever method suits you best is the one you should choose.
Once you’ve tracked your spending for a couple of weeks, you can then evaluate where you might be over-spending and how you can go about cutting back.
But the real reason you should track your expenses is so that you can budget honestly. If you think you’re spending $100 a month on coffee, but you’re really spending $350 then your budget will be inaccurate (and useless).
Let’s check out the most popular budgeting methods out there.
#1. The Traditional Budget
The traditional budget is just what it sounds like. It’s the budget you’re probably thinking of when you hear the word “budget.”
A traditional budget includes income and expenses. It’s a way of laying out all your projected earnings and spending.
How does it work?
A traditional budget works by listing ALL your expenses. Everything – needs, wants, wastes, everything. Traditional budgets also list all your income sources.
Traditional budgets are usually planned for several months to a year at a time.
A traditional budget will have three columns: budget (or estimate), actual, and the difference. Every month you would enter your actual income and expenses and compare the difference.
How much work is a traditional budget?
A traditional budget is pretty time-consuming. It’s also fairly tedious.
Who is it best for?
The traditional budget is best for detail-oriented people. It’s also extremely helpful for people who have rather large spending or debt issues that they need to take care of.
Where can I get more information & templates for traditional budgets?
#2. Proportional Budgets
The 50/30/20 and (less popular but simpler) 80/20 budgets are methods of proportional budgeting.
How does it work?
You allocate your income based on percentages.
For the 50/30/20 budget: 50% of your income goes to things you need, 30% to things you want, and 20% to debt or savings.
For the 80/20 budget: 80% of your income goes to things and 20% goes to debt or savings.
Let’s use an example. If you make $3,000 a month (after taxes and deductions).
For 50/30/20:
$1,500 would go towards needs (rent, electricity, water, groceries, etc)
$900 would go towards wants (coffee, movies, eating out, cable, etc)
$600 would be used to pay down debt or saved.
For the 80/20:
$2,400 would go to rent, electricity, coffee, groceries, movies, etc.,
$600 would go to debt or savings
How much work is a proportional budget?
A proportional budget is really simple because you just figure out the amounts and go forth and spend them.
The biggest difficulty with a 50/30/20 budget is determining the difference between a need and a want. The 80/20 budget is pretty much the easiest budget you’ll ever find.
Who is it best for?
This method is best for people who aren’t good at following a strict budget. It’s also good for people with limited time to track and manage a budget.
Where can I get more information & templates for proportional budgets?
#3. Calendar Budgets
A calendar budget is a budget laid out on a calendar.
How does it work?
A calendar budget is focused mostly on making payments.
You mark your expenses on a calendar so that you never miss a payment (or run out of money).
How much work is a calendar budget?
A calendar budget is a medium amount of work. You’ll need to know all your expenses and mark them on a calendar. You’ll also need to regularly check your calendar to make sure you don’t miss anything.
Who is it best for?
Calendar budgets are best for people who miss a lot of payment deadlines or overspend and don’t have enough money to pay bills.
Where can I get more information & templates for the 80/20 budget?
#4. The Pay Yourself First Budget
The pay yourself first budget is focused on saving. The budget is based around the idea that you should save money first and worry about expenses second.
How does it work?
First, you need to figure out your income and expenses. Then you decide on an amount that you’ll save each month. You should aim to save between 5 and 20% of your income (obviously the more the better).
At the start of the month, you put that money away where you can’t spend it. Most PYF budgets advise you to set it up to move the money automatically so that you never see or touch it.
How much work is a pay yourself first budget?
Once you set it up, it’s easy. You just spend whatever is left and save whatever you decided to.
Who is it best for?
The pay yourself first budget is best for people who don’t want to follow a strict budget AND have trouble saving money at the end of a month.
Where can I get more information & templates for pay yourself first budgets?
#5. The Envelope Budget
The envelope budget is a cash-based budget. It’s usually focused heavily on discretionary spending.
How does it work?
First, you choose your expense categories (usually fairly broad like groceries, entertainment, etc). You create a physical envelope for each category.
Then, you allocate a monthly amount to each. category.
Every month you’ll withdraw the amount(s) in cash and load into your envelopes. You spend from the envelope and when you run out of money, that’s it.
How much work is an envelope budget?
Envelope budgeting can be a lot of work. You’ll need to plan your envelopes, fill your envelopes, and keep an eye on all of them.
However, you don’t have to track each of your expenses so it’s less work than some other budgets.
Who is it best for?
The envelope method is best for people who struggle to control their spending.
Where can I get more information & templates for envelope budgets?
#6. The Zero-Sum Budget
A zero-sum budget is a budget that ends every period with $0 remaining.
How does it work?
At the end of the month, a zero-sum budget will have $0. If you have a number remaining, you determine (in advance) what to do with it.
Every dollar in a zero-sum budget must be allocated somewhere.
How much work is a zero-sum budget?
A zero-sum budget is a moderate amount of work. It’s very similar to a traditional budget, but with an end goal of $0.
Who is it best for?
The zero-sum budget is best for people who see leftover money at the end of a month as “free” money and spend it all.
Where can I get more information & templates for zero-sum budgets?
#7. Other Budgeting Methods
There are a variety of other budgeting methods you can do. You can also choose the elements of the methods above that work best for you and combine them into your own unique style.
Who is it best for?
Other budgeting methods are best for people who are already fairly diligent with their spending. They don’t need the structure of standard budgets or they have some other goal that’s more important.
Where can I get more information & templates for other budgets?
Which is Right for You?
No matter what your life is like, there’s a budget for you! Check out the budget examples and templates above and try them out.
When you find one that works, USE IT!
Ready for more? Check out the Guide to Starting & Using a Budget Calendar.
Let me know your budget method in the comments below!
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