• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
  • Start Here
  • Work with David
  • Our Services
  • Contact
Young Adult Money

Make more. Save more. Live better.

  • Blog
  • Credit Cards
    • Rewards
    • Cash Back
    • Travel
    • Airlines
    • Hotels
    • Balance Transfer
    • Student
    • Business
  • FREE Budget Spreadsheet
  • FREE Student Loan Spreadsheet
This Just In... Check out the latest travel rewards credit card offers

6 Different Ways to Budget Your Money

By Erin / Last updated: November 6, 2020 / Budgeting, Personal Finance

We may receive compensation from companies mentioned within this post via affiliate links. Read our full advertiser disclosure. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities.
Pin9K
Share179
Tweet22
Email
Buffer22
Share19
9K Shares

There are many ways to budget your money aside from a traditional line-item budget. If that hasn't worked for you, try these other budgeting methods.When it comes to how you budget your money, there’s really no right or wrong way to do it.

As long as you’re tracking your expenses and income in some way or another, you should succeed.

I know that goes against common financial advice, but budgeting in its traditional form didn’t work for me, and I hate seeing people give up on budgeting after a few failed attempts.

That’s why we’re covering a number of different ways to budget in this article.

Let’s get to it!

 

1) The “Traditional” Line-Item Budget

 
We’ll start with the basic budget most people are familiar with, since other budgeting methods build off of this premise.

This method works best for those who need to get major spending issues under control, those who need to get out of debt, and those who don’t mind categorizing their expenses.

This is a more time-consuming method, so it’s also good for people who don’t mind tedious tasks.

I know, I made that sound so appealing. But the truth is, this is the classic example of budgeting for a reason – it works (for most people).

To get started, list out all of your expenses, both necessary and discretionary. That means everything from your rent/mortgage, utilities, insurance premiums, copayments, cell phone bill, groceries, gas, pet supplies, hair cuts, clothing, and debt get recorded.

You can get really detailed with your categories and have “household,” “debt,” “transportation,” “food,” etc. listed out, with all the separate expenses underneath. That’s why it’s a “line-item” budget – you break everything out so you can see exactly where your money is going.

You should also have three columns: estimated spending, actual spending, and what’s leftover. This way, you can see how well you did, and compare your total spending with your income.

If you think this is a good budgeting method for you, grab our free budget spreadsheet below. It’s automated using Tiller, which also has their own free budget templates in Google Sheets. Tiller grabs all your spend data and puts it in a uniform format, making it a truly automated way to track your spending and update your budget.

 

Join our Online Community to Receive your FREE Automated Budget Spreadsheet in Excel

 

2) Proportional Budgets

 
You might have heard of the 80/20 budget, or the 50/30/20 budget. These budgets give you loose guidelines on how to spend and save your money.

For example, in the 80/20 budget, you spend 80% of your income, and save 20%. In the 50/30/20 budget, you spend 50% on necessary items (needs), 30% on discretionary expenses (wants), and put 20% toward debt and savings.

This budgeting method is good for those who don’t want to follow a super strict line-item budget, or spend tons of time updating their spending. This method allows you to figure out how much to put away, and how much to spend, in simple terms.

The only potential issue here is that you need to discern between wants and needs. Unfortunately, a lot of people blur the lines, causing them to justify their spending on wants. Be careful of this if you choose this budgeting method.

You may be wondering, what if your debt repayments total more than 20% of your income? Or your necessary expenses are more than half your income?

You can think outside the guidelines and modify them. Maybe you want to follow a 30/10/60 model and save more money, or maybe you need to do 40/10/50 to pay off your debt and save quicker.

The lesson here is that budgets are supposed to be flexible so you can modify them when your life situation changes.

 

3) The Pay Yourself First Model

 
Paying yourself first puts the focus on your savings. That’s because you put money away at the beginning of the month, before you have a chance to spend it on anything.

It requires you to figure out the difference between your income and expenses upfront, but after that, it’s smooth sailing until you need to change it up.

This budgeting method is good for those who are left wondering where all their money went at the end of the month, and don’t want to follow a strict budget.

Total up your monthly net income (take an average of the last six months if your income fluctuates), total up all of your monthly expenses, and then subtract to find out what’s left. Ideally, you want to be sending this amount to your savings. You can use a spreadsheet or budgeting app to help calculate this.

A good rule of thumb to follow for how much you should be saving is to aim for at least 5% of your income. 10% is great, and 20% is amazing, but I know as young adults, we sometimes don’t have a ton of money to work with (especially with student loan debt to deal with).

If you’re in the red each month, then you need to figure out ways to reduce your expenses or earn more so that you have money to spare for savings.

 

4) The Envelope Budget

 
This budgeting method is similar to a line-item budget, but simplified, and usually based around using cash only.

You figure out the major expense categories you need cash for, such as groceries, gas, dining out, entertainment, fun, etc., grab envelopes for your categories, and then figure out how much money you can allocate for each.

Then, take a trip to the ATM and withdraw the amount of money you’ll need for the month. Divide your cash up between the envelopes.

When your cash is gone, you can’t spend more. It’s that simple, and it forces you to get creative if you’re running low.

At the very least, it makes you more aware of your spending. For example, you might head to the grocery store toward the end of the month, and realize you only have $50 left to spend. You’ll be motivated to get the most out of your money!

This budgeting method is good for those who have problems controlling their spending with credit or debit cards, and don’t realize how much they’re spending and where. It also works well for those getting out of debt and those who don’t feel comfortable using plastic.

 

5) Zero-Sum Budget

 
This is exactly what it sounds like. At the end of the month, your budget should equal zero. That means that if you have $300 left at the end of the month, you need to give that $300 a job. Every dollar needs to be accounted for.

This budgeting method is good for those who often have money left at the end of the month, but end up thinking of it as money they’re free to spend.

While this might seem like the opposite of the pay yourself first method, it can be used similarly if you budget based on last month’s income. It forces you to plan ahead and think strategically about how you want to spend your money.

Check out the book Zero Down Your Debt for a more comprehensive overview of this budgeting method.

 

6) The Opposite of a Budget, Budget

 
This last one is something I follow. It’s not exactly a budget, it’s more of a philosophy, but it still involves tracking your spending.

Instead of worrying about how much I’m spending per category, I spend based on my values, and cut everything else out.

This sounds a lot easier than it is.

This “budgeting” method is good for those who are already frugal, very aware of and disciplined with their spending, and those who naturally enjoy saving.

I wouldn’t recommend this method for someone completely new to money management because, well, they probably need to learn the basics of managing their money well first.

But for those of us who think saving money is fun, it can sometimes be a relief to not track every single penny. When you’re spending on needs and minimal wants, and still heading in the right financial direction, there might not be a need for a strict budget.

How this works is I have a basic outline for what I’m allowed to spend on, my core values, and anything that falls outside of that doesn’t get priority.

For example, I barely spend money on restaurants and entertainment because I’d rather eat at home and have a fun night in with friends. However, I will spend money on travel, especially if family is involved. I treat myself occasionally, especially if it’s centered around a new experience. I like coffee, having pets, and I will invest money in myself and my business when appropriate.

That doesn’t mean I go all out and spend like crazy. I still find ways to save; I research prices, find digital coupons, travel hack, and look for specials. The key is knowing how to keep your spending in check.

 
 
Are you ready to start budgeting yet? You now have six methods to choose from, and there are still more out there.

Remember that you can modify any of these methods to suit your needs. Don’t pigeonhole your finances into something that won’t work. A budget should be flexible and forgiving.

 
 
What budgeting method do you like to use? Are there any that you don’t like? What do you do to make budgeting easier?
 
 

Check out some of our favorite personal finance resources:

Are you getting the best credit card rewards? Check out the top cash back credit card offers (updated daily)

Make extra money: 15 ways to make money from your computer

  • Get our FREE Automated Budget Spreadsheet and our Student Loan Spreadsheet

Get the First Chapter Free!

Student Loan Solution Cover - 3D

Join our online community and get the first chapter of the book Student Loan Solution absolutely FREE!

Pin9K
Share179
Tweet22
Email
Buffer22
Share19
9K Shares

Erin

Erin is a full-time personal finance freelance writer and virtual assistant. She's passionate about helping other millennials get started on their financial journey. She writes about balancing financial responsibility with living life, gratitude, and tackling student loan debt on Journey to Saving. She also loves cats. Like, a lot.
Connect:

Comments Policy

Comments, responses, and other user-generated content is not provided or commissioned by this site or our advertisers. Responses have not been reviewed, approved, or otherwise endorsed by this website or its advertisers. It is not the responsibility of advertisers or this website to ensure that all comments and/or questions are answered. With all that being said, please comment away!

Reader Interactions

Comments

  1. John @ Frugal Rules says

    Great overview of some of the different methods Erin. We’re closest to #6. We’ve lived on some sort of a budget for so long it works best for us and it helps us spend/save in line with what we value. We use Personal Capital and a spreadsheet or two to help us manage things and it works for us.

    • Erin says

      That’s great, John! I use Mint and update it around twice a week to make sure I’m on track with things. It’s definitely easier to transition to this method when you’ve been budgeting previously and it becomes second nature.

  2. Amanda @ centsiblyrich says

    Great overview of the various ways to budget!

    We use a version of #6. I still track my expenses (to the penny) to make sure my spending is continuing to align with my values. Plus, I am a saver and frugal by nature so this method works well for me. (And, I’ve never had my nails done :) !)

    • Erin says

      I’m glad I’m not alone – on both counts! I track my spending as well, but I try not to focus too much on the numbers (if I spent $10 over my original grocery budget I used to beat myself up for it). My main goal is making sure I’m still progressing on debt payoff and saving for my various goals, so as long as that’s done, I know my spending isn’t going crazy.

  3. Fehmeen says

    I’m more of a ‘pay yourself first’ budgetor, because this method forces me to live within my means, no matter how much or how little money I earn that particular month. It’s a pretty easy way to ensure your savings go up regularly, and the easiest way to deal with that is to setup an automatic savings mechanism through an online banking platform so as soon as the salary arrives, a small portion of it is sent into another account, to be ‘forgotten’.

  4. giulia says

    Yes if you are in debt you need abudget and you need have also when you paid it off, I am debt free but I am focusing on savings so budget is really important…everyone has a personal method but thanks for sharing all these strategies!!!

  5. Josh says

    We mostly follow the line-item budget method. We do think of some things (savings and retirement) as percentages, but only after we set predetermined dollar amounts.

    After all we pay $XXX.XX in credit card payments or electric bills, not 100% or 95%. Why? Because the amount usually varies each month. We set aside a normal amount like $100 as that is the monthly bill but sometimes it $101 & $92 the next month, etc.

  6. Kalie @ Pretend to Be Poor says

    You’re so right that different approaches work for different people. We are in the last camp–tracking and values-based spending rather than a traditional budget. But this is after several years of traditional budgeting, and you’re right–it works for those who are already frugal. Thanks for laying all these options and whom it might work best for!

  7. Hannah says

    We love the zero sum budget, but I don’t think it always pays to be so rigorous. As long as you’re making headway and you and your spouse agree, I think the budgeting method works.

  8. Cara @ Fashionably Frugal says

    I like seeing all these laid out together, thank you.
    I kind of mix mine all up. I like to have everything planned and laid out, with X amount going to savings, X amount going to travel fund, etc. then I usually follow the envelope method for my groceries, gas, etc. But I play a game each month to see how much I can save while doing that, whether it’s buying groceries at the discount grocery store, or driving less. Then I take the leftover money and put it in saving too.

  9. Keith "Shin" Schindler says

    Wow, Erin!

    More great stuff. As I’m not a Line-item kind of guy, I like the other alternatives.

    I basically budget all the set bills, including property taxes, and what’s left over gets saved and spent. Been working for a couple of years now.

    Thanks for the awesome info!

Primary Sidebar

Credit Cards

  • Best Travel Rewards Cards
  • Best Balance Transfer Cards
  • Best Cash Back Credit Cards
  • Best Business And Side Hustle Credit Cards
  • Best Student Credit Cards

Start a Blog:

How to Start a Blog that Makes Money
 

Top Posts

  • 15 Ways You Can Make Money From Your Computer Right Now
  • When You Should and Shouldn’t Refinance Student Loans
  • How Much Money You Will Need to Make $1,000 in Dividends

Free Spreadsheets & Downloads

  • Free Automated Budget Spreadsheet
  • Student Loan Repayment Spreadsheet
  • The Ultimate Personal Finance Checklist
  • 401k Spreadsheet to Analyze your Options
  • Wedding Budget Spreadsheet
  • 52 Week Money Challenge Spreadsheet and Printable

First Chapter Free!

Join our online community and receive the first chapter of Student Loan Solution absolutely FREE.

If you don't see the email in your inbox, please check your spam folder.

Connect:

Categories:

Search:

Get the New Book!

Student Loan Solution: 5 Steps to Take Control of Your Student Loans and Financial Life is available on Amazon by clicking here, or by clicking on the graphic below.

Make more. Save more. Live better.

Site Directory:

  • About
  • Contact
  • Advertise
  • Recommendations
  • Finance Tools
  • Credit Cards
  • Insurance
  • Banking
  • Investing

Disclaimer | Privacy Policy

Feedback? Questions?
Contact us and let us know what you think.

Connect:

Search This Site:

Copyright © 2012–2024 Young Adult Money, LLC / All Rights Reserved
Designed by LizTheresa.com / Developed by Nuts and Bolts Media

Manage your privacy

To provide the best experiences, we and our partners use technologies like cookies to store and/or access device information. Consenting to these technologies will allow us and our partners to process personal data such as browsing behavior or unique IDs on this site and show (non-) personalized ads. Not consenting or withdrawing consent, may adversely affect certain features and functions.

Click below to consent to the above or make granular choices. Your choices will be applied to this site only. You can change your settings at any time, including withdrawing your consent, by using the toggles on the Cookie Policy, or by clicking on the manage consent button at the bottom of the screen.

Functional Always active
The technical storage or access is strictly necessary for the legitimate purpose of enabling the use of a specific service explicitly requested by the subscriber or user, or for the sole purpose of carrying out the transmission of a communication over an electronic communications network.
Preferences
The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user.
Statistics
The technical storage or access that is used exclusively for statistical purposes. The technical storage or access that is used exclusively for anonymous statistical purposes. Without a subpoena, voluntary compliance on the part of your Internet Service Provider, or additional records from a third party, information stored or retrieved for this purpose alone cannot usually be used to identify you.
Marketing
The technical storage or access is required to create user profiles to send advertising, or to track the user on a website or across several websites for similar marketing purposes.
Statistics

Marketing

Features
Always active

Always active
Manage options Manage services Manage vendors Read more about these purposes
Manage options
{title} {title} {title}
Manage your privacy

To provide the best experiences, we and our partners use technologies like cookies to store and/or access device information. Consenting to these technologies will allow us and our partners to process personal data such as browsing behavior or unique IDs on this site and show (non-) personalized ads. Not consenting or withdrawing consent, may adversely affect certain features and functions.

Click below to consent to the above or make granular choices. Your choices will be applied to this site only. You can change your settings at any time, including withdrawing your consent, by using the toggles on the Cookie Policy, or by clicking on the manage consent button at the bottom of the screen.

Functional Always active
The technical storage or access is strictly necessary for the legitimate purpose of enabling the use of a specific service explicitly requested by the subscriber or user, or for the sole purpose of carrying out the transmission of a communication over an electronic communications network.
Preferences
The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user.
Statistics
The technical storage or access that is used exclusively for statistical purposes. The technical storage or access that is used exclusively for anonymous statistical purposes. Without a subpoena, voluntary compliance on the part of your Internet Service Provider, or additional records from a third party, information stored or retrieved for this purpose alone cannot usually be used to identify you.
Marketing
The technical storage or access is required to create user profiles to send advertising, or to track the user on a website or across several websites for similar marketing purposes.
Manage options Manage services Manage vendors Read more about these purposes
Manage options
{title} {title} {title}