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Infographic: Different Styles of Budgeting

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There’s more than one way to make a budget. Use this guide to learn about the different ways you can manage your expenses as you work toward your financial goals.

Percentage-Based Budget

Percentage-based budgeting asks you to divide up your expenses into different categories, with each representing a certain percentage of your after-tax income. The 50/30/20 is a common example. Using the recommended budget percentages:

  • 50% of your earnings would go toward essential needs, such as housing, food and transportation.
  • 30% would go toward non-essential purchases, such as travel, eating out and entertainment.
  • The remaining 20% would go into savings or debt repayment.
  • You can adjust these percentages based on your needs and current lifestyle.

Envelope Budget

You can also save money by setting aside a certain amount of cash each month. This is what’s known as an envelope budget.

  • Keep cash in a folder or set aside a certain amount of your earnings for your wants and indulgences.
  • This can also be done electronically by setting up separate checking shares for each budgeting category.
  • When you run out of money for the month, you’ll need to rein in your expenses.
  • Having a hard copy helps you resist the urge to use your credit cards.

Automatic Budget

Most companies offer automatic payment and transfer options, so you don’t have to pay your bills manually every month.

  • Set up automatic payments for regular expenses, so you don’t fall behind on rent, utilities, student loans and credit card bills.
  • Consider paying your bills early to avoid running out of money at the end of the month.
  • Automatically transfer a certain amount of your income into a separate account or retirement account to build your savings every month.

Comprehensive/Detail Budget

Details matter. The comprehensive budget requires you to list every single expense, so you know where all of your money is going.

  • Make a spreadsheet of all your expenses for the month, including automatic payments, cash purchases and small items that you might otherwise miss.
  • Watch out for service fees and automatic charges to your account. If you are being charged for something you don’t need, get rid of the expense and consider asking for a refund.
  • As you learn more about how you spend your money, look for ways to eliminate smaller expenses that can eat away at your finances.

Zero-Based Budget

The zero-based budget asks you to allocate all of your earnings to specific categories, such as savings, housing costs, transportation and luxuries. Your total income for the month minus expenditures should equal zero.

  • Use the zero-based budget to keep track of how you spend every cent of your money.
  • Put a certain percentage of your income into your savings or investment account every month.
  • Consider changing these percentages from month to save as much as possible.

Reverse Budget or Pay Yourself First

The reverse budget takes the opposite approach. As soon as you get paid, put a certain amount of money toward debt payments or your savings or investment account. You can then use what is left over to pay your bills and indulge in luxuries.

  • Use this method to prioritize saving and investing instead of waiting to save or invest at the end of the month when you might have less money.
  • Once you make your monthly deposit, you can relax knowing you can spend your money however you like.
  • You may need to cut back on expenses or reduce your cost of living to make ends meet for the rest of the month.

Values-Based Budget

Value-based budgeting is all about spending money on things you care about. You can assign your income to different spending categories or track individual expenses. Rate each category or purchase based on how much it means to you.

  • Use this budget to eliminate unnecessary purchases or items that bring little value to your life.
  • It helps you focus on the things you value most in life, such as time with loved ones and personal care, so you know your money is going to good use.
  • Continue to reevaluate your goals as time goes on to stay on the right track.

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