3 Different Ways To Budget: What Is Your Budgeting Style?

Different ways to budget

One of the reasons why many people shy away from budgeting is because it can seem tedious, annoying and perhaps even difficult. As result, they struggle with being successful creating and/or sticking to a budget.

However, there are a variety of different ways in which you can budget and your success with budgeting can be greatly improved by the budgeting method / style you select.

The method you choose is entirely up to you, the most important part is picking a style that works for your life and one that you (can grow to) like even if you currently hate budgeting!

If you are still trying to find a budgeting method that works for you, below are a few different methods that you can consider.

3 different types of budgeting methods:

1. The envelope or cash method

This works by subtracting your expenses from your income and then putting each expense amount into it's own envelope. This would include things like bills you need to pay and your day to day expenditure. 

You can keep the money for your big bills in virtual envelopes that you track through a spreadsheet or app and then put actual cash for your smaller expenses or day to day transactions in actual physical envelopes.

Once the envelope for a particular expense is depleted, you can no longer spend anymore money in that category unless it is an emergency. If you don't spend all the money in a particular expense envelope, then you can repurpose the funds towards something else like savings or debt.


2. The percentage breakout method

The most common being the 50/30/20 breakout. In this method, you break your income into percentages and then plan out your spending and savings accordingly. 

No more than 50% of your income would go towards your needs and essentials so things like housing, transportation, food etc.

No more than 30% of your income would go on wants and non-essentials for instance travel, getting your hair done, shopping etc

At least 20% of your income would go towards savings and debt repayment.

Keep in mind that these percentages are not set in stone. For instance you can choose to spend less in the needs & essentials and wants & non-essentials categories and put more to savings or debt repayment.

So for example you can select a 35/30/35 breakout, a 35/35/40 breakout or even a 25/25/50 breakout. The goal is setting percentage breakouts that make sense for you.

One important thing to keep in mind is that regardless of what breakout your choose, you want to be mindful of spending more than 30% of your income on housing alone otherwise it can get harder to put money towards your other financial goals.

3. The anti-budgeting or reverse budgeting method

In this method, you focus on a single goal such as paying off a certain amount of debt or saving a certain amount money each month in addition to paying your bills. And then as long as you meet your monthly goal and pay your bills without exceeding your income, you can do what you like with the money you have left over.


Using apps to budget

Apps make it really simple to budget especially if you can connect your bank accounts to them. They eliminate the manual aspect of tracking your transactions and for the most part all you need to do is check-in frequently to ensure you transactions are tracked the right way and set up alerts to keep you on top of your budget. You can set up your budget to be reflective of any of the above budgeting methods. Some really popular budgeting apps include Mint, Penny, YNAB, Wally,  etc


What is your favorite budgeting style? Share in the comments!

Bola Onada Sokunbi

Bola Onada Sokunbi

Bola is a Certified Financial Educator, money coach, finance writer, business strategist, social media influencer and founder of Clever Girl Finance, a platform that empowers and educates women to make the best financial decisions for their current and future selves and to pursue their dreams of financial independence in order to live life on their own terms.