Which Budgeting Method Is Best For You?
If you only do one thing to help your finances it’s finding a budgeting method that works for you. It’s the foundation of financial security and being in control of your money.
Creating a budget may come naturally to some people but not to others. And creating it is one thing, but sticking to it is another.
We’re all different and our goals/ priorities are all different. So the method that works for me may not work for you, and the budgeting method that works for you may not work for your friend.
Whether you track every single penny or are more go-with-the-flow there’s a method out there for you. Here are some of the budgeting methods out there.
Zero-based budgeting
Out of all the budgeting methods I’ve tried this has been the one that’s worked best for me.
Zero-based budgeting encourages you to use every penny of your income. So when you’ve finished your budget your income and your total spend figures are the same. This means that every single penny is accounted for whether that’s in savings, sinking funds, debt repayments or fun money to spend.
Find out how to start with zero-based budgeting.
Budgeting methods- 50/30/20
The 50/30/20 budget is one of the more ‘traditional’ methods and the one you may hear spoken about the most. All of your spending should fall into needs, wants and savings.
So 50% o your income goes onto ‘needs’. This is generally your living costs and things that don’t vary too much every month including rent/ mortgage, household bills, insurance and food. Then 30% of your earnings goes on ‘wants’. These will be the general spending, the fun stuff like subscriptions services, holidays and clothes. And then 20% of your income goes into savings.
Find out more about setting up the 50/30/20 budgeting method.
Reverse budgeting
This budgeting method is about paying yourself first and then figuring out the rest of your budget from what’s leftover. So you’d start off with your savings and investments, then your bills and fixed costs. Any leftover money is for your spending/ wants.
By doing this you’re making investing and saving a priority. Although this doesn’t mean sacrificing basic needs like food or housing. But it puts savings before any wants you may have like shopping or eating out.
Find out how reverse budgeting works and how to implement it.
Budgeting methods- Piggybanking
I’ve used the piggybanking method of budgeting before, and I was doing it before I even knew it had a name.
This budgeting method relies on splitting your money out and automating your spending. You’d have separate pots for all different things like household bills, Christmas, entertainment, holidays etc. Then once you have these pots on payday create a standing order for your budgeted amount to fill each piggy bank.
So on payday you may put £800 into your household bills bank to cover everything that money, than £50 into your Christmas pot, £100 in your holiday savings etc. Your automated payments into pots should equal your income and then you have your money spread out. You may have a set amount for clothes shopping that month, or takeaways. And once you’ve spent that money you’ve got to wait until payday again.
This method is very similar to the physical version called cash stuffing. But this method is becoming less common as people use cash less.
Find out more about the piggybanking method and where to start.
Priority based budgeting
Priority budgeting looks at your budget like a pyramid. You have the important things at the top which are your priorities. For most people the very top will be day-to-day living expenses. And then the rest of the pyramid is your priorities for where your money goes. Everyone’s priority pyramid will be different but next up might be debt repayments, then you could have sinking funds, investments, a house deposit, a wedding, a holiday, whatever is important to you.
You allocate money going down your pyramid. So the things at the bottom are likely to get the least money. But once an item higher up is funded you can move other items up/ add new things in.
Find out more about priority based budgeting.
What budgeting method works best for you?
These five options are an exhaustive list of all of the methods available, so if they don’t sound right for you then do some research and see what works best. If you’re self-employed with a variable income you may need a totally different method.
You may have an instant idea of which method will work for you, but it may be trial and error. Or you may find that budgeting in general isn’t for you. I’ve used a few different methods over the years, and being in a double income household changed things again.
19 responses to “Which Budgeting Method Is Best For You?”
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Rhian Westbury
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Budgeting is so important, not so much now but years ago my mortgage was taken straight from my wages so that was always paid, as I worked for the company. I would then list down all outgoings and then split what was left into how many weeks until payday and then try to spend less so at the end of the month I would put what was left into savings
I’m really attracted to the zero method. It makes so much sense to me!
That’s what works best for me as I know every penny is accounted for x
These are extremely helpful! I’ve budgeted before but most of the time it was a useless exercise for me. I bet I was doing it wrong! I love the idea of reverse budgeting. I will try it. Thanks a lot.
There’s no right and wrong, but you may have been using a method that just didn’t suit you x
As a mom trying to juggle expenses, it’s super helpful to have insights like these to stay on track financially. Definitely going to give some of these methods a try and see which one works best for our family.
It’s good to have options when it comes to budgeting. Work works well for one may not work so well for another so this post comes in very helpful. I work mine around prioritise as this can change over time.
So true, everyone’s different so what works for everyone will be different x
Its good to have options when it comes to budgeting! As a young adult it’s important to know how to handle expenses. Thanks for sharing this.
I have been struggling to figure out what is the best thing for me. I am interested in learning more about the zero-based budgeting that you prefer, thanks for brining this to my attention, I am going to check that out now.
I learned very early on that budgeting isn’t hard it’s learning to sacrifice sometimes but mostly discipline yourself. Great post. I love the overview of all the methods. Sometimes you just need to start!
Yes it’s discipline and consistency, getting yourself used to doing things x
I don’t do budgeting and in the end I regret. This post is very helpful. Zero based budgeting sounds best for me.
I would say I do the priority budgeting. I write out the monthly income then deduct all bills, after that I minus groceries, gas, and subscriptions. After that I decide how much to put into savings, I pop a little into each of my kids savings and then the rest is fun money.
That’s great that you’ve found something that works for you x
I had only heard of the 50/30/20 budgting method previously and it’s great to hear about other ones! Thank you for sharing.
This is a great list of budgeting tips, thanks for sharing!! I am someone who has always been pretty good with their money and could survive and meet goals without having a budget plan in place. But I have actually tried all of these over the years and all of them worked great to where I would use any of these methods again!!
That’s impressive that you can do everything without having a budget in place. I wish my goals were low enough, or I earnt enough to do that myself x
I have lost sight of some of our budgeting goals. It is good to have some tips and tools to help.