Budgeting. It’s a word that can evoke groans and eye rolls, conjuring images of restrictive spreadsheets and penny-pinching misery. But the truth is, budgeting is simply a tool – a powerful one – to help you take control of your finances, achieve your goals, and create a life of greater freedom and abundance.

The key is finding the right budgeting style for you. Just like a favourite pair of jeans, your budget should fit comfortably and support you on your journey, not feel constricting or uncomfortable.

Let’s explore some of the most popular budgeting methods, along with their pros and cons, to help you discover the perfect fit for your financial lifestyle.

1. The 50/30/20 Budget

This popular method provides a simple framework for allocating your after-tax income:

• 50% for Needs: Essential expenses like housing, utilities, groceries, and transportation.

• 30% for Wants: Discretionary spending on things like entertainment, dining out, and hobbies.

• 20% for Savings and Debt Repayment: Building your financial security through savings goals, debt payoff, and investments.

Pros:

• Easy to understand and implement.

• Provides a balanced approach to spending, saving, and debt management.

• Flexible enough to adapt to different income levels and lifestyles.

Cons: 

• May not be detailed enough for those who need more granular control over their spending.

• Can be challenging to stick to the percentages if your income fluctuates.

2. The Envelope System

This classic method involves dividing your cash into envelopes labelled with different spending categories (groceries, entertainment, transportation, etc.). Once the cash in an envelope is gone, you’re done spending in that category for the month. 

Pros: 

• Provides a tangible and visual way to track spending.

• Helps curb overspending by limiting you to the cash on hand.

• Can be particularly effective for managing discretionary spending.

Cons: 

• Not ideal for those who prefer to use credit cards or digital payment methods.

• Can be inconvenient to carry around cash.

• Requires discipline to avoid dipping into other envelopes when one runs out.

3. The Pay Yourself First Budget

This method prioritises saving by automating regular transfers to your savings or investment accounts as soon as you receive your paycheck. You then budget the remaining amount for your expenses.

Pros: 

• Makes saving a non-negotiable part of your financial plan.

• Helps build financial discipline and automate good habits.

• Ensures that you’re consistently putting money aside for your future.

Cons: 

• Requires a clear understanding of your essential expenses to avoid overdrawing your checking account.

• May not be suitable for those with irregular income or fluctuating expenses.

4. The Zero-Based Budget (Our Favourite!) 

This method involves allocating every dollar of your income to a specific category, ensuring that your income minus expenses equals zero. It’s like giving every dollar a “job” to do. 

Pros: 

• Provides complete control over your finances and eliminates “mystery money.”

• Prioritises your spending based on your values and goals.

• Reduces financial guilt and encourages mindful spending.

• Can be adapted to accommodate irregular income and changing priorities.

Cons: 

• Can be time-consuming to set up initially.

• Requires consistent tracking and adjustments.

Here at Got Money Honey, we believe the zero-based budget is the most effective way to achieve your financial goals and create a life of abundance. While it might seem daunting at first, it’s not as complicated as you think.

And guess what? We’re here to help!

Inside our course, My Money Makeover, we provide you with all the tools and templates you need to master your zero-based budget. You’ll learn how to:

• Track your income and expenses with ease.

• Identify and eliminate unnecessary spending.

• Set realistic financial goals and create a plan to achieve them.

• Automate your savings and build a secure financial future.