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Budgeting Systems For Every Financial Situation

Budgeting Systems for Every Financial Situation

Updated on February 2, 2023

 Personal Finance

Budgeting is crucial for balancing your expenses with your income. This spending plan ensures you have enough money to cover your needs and wants. It'll also help you to either keep out of debt or work your way out of it. However, there's no one-size-fits-all budgeting system.

Each person has different essential expenses, nonessential spending, and financial goals. We've got you covered if you're looking for the best budgeting method. Here are some of the most common budgeting systems for every financial situation.


Zero-based budgeting (ZBB) is for people with a set monthly income or those who can reasonably estimate their monthly salary. It involves developing a new budget from scratch every time, called zero. As a result, you'll constantly check your finances with fresh eyes, free from your targets, budget history, and the limitations of past assumptions.

Its method is straightforward: income minus expenses equals zero. Include your monthly giving (recommended 10% of your income), savings, essentials, non-essentials, and month-specific costs when adding up your monthly payments. Then, as stated, subtract them from your income to equal zero. Repeat before the next month begins. More importantly, note that it's only your income equal to zero, not your accounts.

As noticed, there's a need to dig into the details behind each line item with ZBB. That's why it's often considered the most time-consuming budgeting method. It could also throw your budget off if you take cash from one spending category to compensate for going over to another type.

Envelope System

The envelope system budget is primarily for cash users and habitual overspenders. As its name implies, you must allocate cash into different envelopes representing each spending category. Doing so allows granular insight into monthly spending, causing you to avoid overspending.

The envelope system is similar to zero-based budgeting, except you do it with cash. It has to be done manually, such as collecting receipts, jotting down your expenses, and deducting them from envelope totals. While it isn't massively tricky, having no automatic import of data and transferring funds offline can be minorly inconvenient.

On top of that, the cashless society is slowly taking over. More and more stores are no longer accepting cash. It worsened after public concerns that cash transactions could spread the COVID-19 virus. Even worse, carrying cash can make other people uncomfortable and unsafe since it'll make you vulnerable to losing some (if not all) of the money to theft.


The pay-yourself-first budgeting is designed for people who are determined to save up. It requires you to route a specified savings contribution from each of your paychecks when it's received. In other words, instead of your immediate needs, you're paying your future self first and prioritizing long-term financial well-being with this method.

Since the goal is to ensure savings, it helps if you automate all your monthly contributions. Manually doing them will also do, but it's time-consuming, and you'll likely be tempted to spend that money elsewhere.

Once you've set aside your savings, you can spend the rest of your paycheck however you deem fit. Keep monitoring the process and adjust as you need. However, the pay-yourself-first method only works in some situations, especially if you have significant debt.

If that's the case, opt for a debt avalanche strategy. It focuses on paying off high-interest debt first to prevent interest from eating into your ability to save. You can even take out loans with better deals, like CreditNinja online loans, to pay off these high-interest debts. With lower monthly credit dues, you'll be able to save more money. Once you settle your debt, increase your monthly savings contributions.

50/30/20 Rule

The 50/30/20 Rule is a flexible personal budgeting choice for newbie budgeters. It's called 50/30/20 because you're going to divide your after-income tax into three: 50% on needs and obligations, 20% on savings and debt repayment, and 30% on your wants.

It also requires elementary math: just 50%, 20%, and 30%. Compared to other systems with several spending categories, it only involves minimal tracking, which is helpful for beginners. If your financial goals still need to align with this method after a few months entirely, you can easily use these figures as a baseline to guide you in adjusting it to a more realistic budget.

The 50/30/20 Rule can only be unrealistic if your expense is more significant than the one category can cover. For example, your debt and savings are more than 20% of your disposable income. The good news is that it's very flexible, so you can customize it to fit your needs. For example, you can increase the savings and debt repayments category and decrease the discretionary or necessary expenses categories.

Final Thoughts

A budget may only be a spending plan accounting for your current and future income and expenses, but it's a financial lesson that can't be overemphasized. It also helps you be on track with your finances and prepares you for unforeseen events.

David Owens

David Owens

David Owens is a seasoned content writer specializing in finance - debt management, entrepreneurship, and business finance.

When not writing, he travels with his cat, Mellie.