What is the best budgeting method for you?

There are many different types of budgets out there, for all types of people and situations.

But what budgeting method is the best one for you?

When I first started my budgeting journey I had no idea what a budget was much less what type of budget was right for me. Since being on a budget I have tried two budgeting methods, Cash envelopes and a zero based budget.

But I was also interested to find out what other methods are out there and which ones are the most popular.

So if your new to budgeting or want a change but not sure what budget to go for then keep reading as I have done some research and found 3 of the most popular budget methods. I will be sharing the basics of the method, who it will work best for and what could go wrong. So keep reading.

The Balance Money Formula (50-20-30)


The balance money formula is most commonly known as the 50-20-30 budget and is very popular.

This method uses percentages to determine how this budget works. The idea is to spend 50% of your total income on your needs, 20% on savings, and 30% on wants.

But what is a need? 50%

A need is something that you need in order to survive such as mortgage, utilities, clothing, groceries, gas and much more. Basically anything that you cannot live without!

But this doesn’t mean that you can treat yourself every now and then.

What about savings? 20%

Your savings consist of any saving goals you have such as an emergency fund, debt repayment and even retirement goals.

It is a similar concept to what Dave Ramsey advocates with having a small emergency fund and concentrating on paying off your debt. (Keep an eye on my blog posts as I have a post coming soon all about Dave Ramsey’s baby steps)

What is a want? 30%

Your wants are exactly that, it is something that you want. You can live without it but you want it.

This includes TV subscriptions, clothing, technology, entertainment and anything else that you would like.

Is this budget for you?

This budget is designed to make budgeting more fun and easier to understand. Some budgeting methods have many different categories and this one only has 3.

So this budget is perfect for anyone who is starting out and finds budgeting confusing as it is very simple to follow.

What could go wrong with this budget?

Overspending has been described as the most common problem with this budget.

Since you are only budgeting for 3 categories it can be quite easy to spend a little too much on food for example and forget that you are low on fuel.

This best thing to stop this from happening is to have some wiggle room in each of your budgets. That way the money can be freely moved from your “wants” money to your “needs” if you overspend.

Cash – only budget (Cash envelopes)


This method is exactly as it sounds, it is cash based!

It is also known as the cash envelope system, where by you only use cash. This method of budgeting has been around for a long time. I remember my grandmother doing this method with her money many years ago. She would have an envelope for food, gas, electric, petrol and savings.

With this method you have a few categories, and then you withdraw the cash out from your bank account. The categories you have depend on your lifestyle, but they mainly include Food, transport, fun, holidays and so many more.

For example if you have a food budget of £400 for a month you will withdraw this from your bank account and keep it in an envelope.

Is this budget for you?

This budget has been described as working best for people who struggle with overspending. As once the cash is gone, it’s gone.

This method also encourages you to leave debit cards and credit cards at home and only use cash.

You can use credit cards if you so wish but it has to be in an emergency and not for every day spending. Using credit cards is completely dependant on your situation, if you are paying off credit card debt then perhaps this isn’t the best idea to use them.

It also allows you to save for all the fun things in life.

What could go wrong with this budget?

Well for one thing you need to make sure that you don’t carry a lot of money with you and not bringing all your cash envelopes with you as this is a risk.

To look after your money there are many envelopes holders online, check out amazon for affordable holders.

It’s also very easy to get confused as it is cash so I would recommend keeping receipts in with your envelopes to keep track. Perhaps even creating a spending tracker.

Zero- based budget:

The zero based budget is the method that I have used for the last two years and it has worked so well for me.

Zero- based budgeting is where the money you have in income matches exactly what is going out of your account. Essentially every penny you earn is being used.

But, this doesn’t mean that you are spending all of your money, it also refers to the money you put away for savings as this is “leaving your account”

When it comes to savings, on pay day you are paying your saving accounts. I pay “myself” (savings) before I spend the rest.

Basically some of your money is going to pay your household bills and the rest you are either paying off debt or maximise savings.

This method is very useful if you are following Dave Ramsey Baby steps, as his steps are all about maximising savings and paying off debt.

With this method, if you were to save and spend exactly what was in each of your budgeted categories, you wouldn’t be positive or negative. You would literally be at £0.

Is this the budget for you?

This budget has been described as the ultimate budget for people who want to be completely in control of their money, like myself.

It allows you to micromanage your money in a good way, as you get to decide in advance where every penny gets spent.

You typically wouldn’t spend any money unless it’s planned for.

This budget is also good for people like saving for many things at once, such as sinking funds. I have found this budget is great for helping me save all year round for birthdays, Christmas and holidays.

What could go wrong with this budget?

With every budget there are things that can go wrong.

Zero-based budgeting can be quite time-consuming due to how much planning and tracking is involved.

Ideally you need to have something that records every transaction so you do not go over budget. For me I use a banking app called Monzo which tracks all my spending and its much easier then writing it out every day.

As I live at home I do not have many bills so for me this budget is very managble as I do not have many outgoings. But if you are someone who has a lot of outgoings then this budget can be a bit too much.

I have also noticed that in this budget there isn’t much room for mistakes as your ending balance is £0 so if you are new to budgeting then perhaps try one of the other methods until you have a better understanding.


I hope this post has giving you an insight into the many budget methods are out there and what ones could work for you.

There are many more budgets out there so please research the best one for you. And it is okay to make mistakes when it comes to budgeting, you need to make mistakes in order to progress.

You can also do your own budget where you incorporate many components of other budgets and make it your own, I know this works for so many people.

Let me know in the comments what is the best budgeting method!

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