3 Ways to Budget Your Money — Which Method Is Right for You?
There’s more than one way to manage your money. These three budgeting methods offer different levels of structure depending on your spending habits and financial goals.
A personal budget can help you rein in spending, meet saving goals and be smarter with your money, but sticking to a budget can be a real challenge. If you’re struggling to budget, it may be because you’re not using the method that’s best for you.
Some people need clear limits set for every dollar, while automating financial priorities and spending what remains works better for others. There’s no single "right" way to budget, and finding the best method for your goals and habits can increase your chances of success.
Let’s take a look at three distinctly different budgeting methods, including 50/30/20, zero-based budgeting and paying yourself first. You might have success with one of these approaches.
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1. The 50/30/20 budget: Best for keeping things simple
If you're not up for tracking all of your spending or recording every purchase, the 50/30/20 budget offers a simpler approach. It gives you some financial guardrails without requiring you to account for every dollar you spend.
With this method, 50% of your income goes toward essentials, 30% toward wants and 20% toward savings and debt repayment.
These percentages are a starting point, not an absolute rule. Depending on your income, housing costs and financial goals, different percentages may be more realistic. You can adjust the framework to better fit your finances.
This percentage-based budget may be a good fit if you want a straightforward framework without constantly monitoring your spending.
2. Zero-based budgeting: Best for taking control of your spending
Zero-based budgeting provides a stricter framework that helps you account for every dollar you earn. With this method, every dollar of income is assigned a job, whether it goes toward bills, everyday spending, savings or investments.
Let's say you bring home $7,000 per month. You budget $2,000 for your mortgage, utilities and other housing costs, $500 for food, $1,000 for recurring bills such as internet and car insurance and $500 for health insurance and medical expenses. You set aside another $500 for wants, such as new clothes or dining out. Each month, you invest $1,500 and put the remaining $1,000 into savings.
$7,000 income - $7,000 assigned to expenses, savings and investments = $0 left unassigned
This method can help you see exactly where your money is going and spot areas where costs have crept up. For example, if you're spending more on groceries than you used to, your budget can make that increase easier to identify. You can then adjust other spending categories to account for the higher expense.
While zero-based budgeting can provide a clear picture of your overall spending, it requires more tracking and regular adjustments than other budgeting methods.
Zero-based budgeting may be best if you want tighter control over your cash flow or are trying to rein in your spending.
3. Pay yourself first: Best for prioritizing savings
The pay-yourself-first method puts saving ahead of spending. Instead of waiting to see how much money is left at the end of the month, you set aside money for savings, retirement, investments or another financial goal first.
Automatic transfers and retirement contributions can make this approach largely hands-off. It may be particularly useful if your expenses are already manageable but you want to increase your savings without maintaining a detailed budget.
However, paying yourself first won't solve underlying overspending issues. If you regularly don't have enough money left to cover your expenses, another method, such as zero-based budgeting, can help you identify where your money is going and where you may need to cut back.
Paying yourself first may be a good fit if you want to prioritize saving and prefer a low-maintenance approach to budgeting.
Which budgeting method is right for you?
The right budgeting method depends on what you want your budget to accomplish. Start by identifying the part of your finances that gives you the most trouble.
If you routinely wonder where your money went, zero-based budgeting can provide more visibility and control. If your spending is generally under control but your savings goals keep getting pushed aside, paying yourself first can make saving a priority. And if detailed budgeting feels like too much work, the 50/30/20 method can give you structure without requiring you to track every purchase.
You also don't have to follow one method perfectly. You might use the 50/30/20 framework to set your overall spending targets while automatically paying yourself first each payday. As your income, expenses and goals change, your budgeting strategy can change with them.
Whichever approach you choose, consistency matters more than following a particular formula. A budgeting method is only useful if it's realistic enough to stick with over time.
The best budget is one you can stick with
The best budget for you isn’t necessarily the most detailed or complex one; it’s the system you’ll actually use. Choose a budgeting method that provides enough structure to help you reach your financial goals without making managing your money an unnecessarily complicated chore that you’ll dread.
A budget can help you manage your money day to day, but you may want additional guidance when you're balancing bigger financial goals. A financial adviser can help you look at your budget as part of your broader financial plan, from building savings to investing for the future.
Use the tool below to connect with a financial professional who can help you evaluate your goals and next steps.
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