How to do budgeting - different ways in which you can budget

There are many different budgeting methods out there floating around in the ocean of information that we call the internet. Some are simple and some are complicated.

A lot of them don’t work. This makes it hard to find a method that will work for you.

Budgeting methods to consider

Before picking a new or different budgeting method, you might want to figure out where your money is going so that you know what areas need your attention.

Once you have an idea of your spending habits and where you can make changes, five different budgeting methods can help you make it happen.  No single budgeting method is best for everyone, so it’s important to compare each and determine what works best for you.

1. Zero-based budget

The concept of a zero-based budgeting method is simple: Income minus expenses equals zero.

This budgeting method is best for people who have a set income each month or at least can reasonably estimate their monthly income. After calculating your monthly income, add up your monthly spending and savings to equal that income amount.

It’s important to plan out all your expenses as accurately as possible. If you go over one spending category, you’ll need to take cash from another category to make up for it. And if you forget a large expense, it could throw your budget off.

Zero-based budgeting is the most time-consuming method because you have to dig into the details behind each line item.

Since there’s less room for error with a zero-based budget, it might be a better option for someone who has already been budgeting for a while. Even then, it’s a good idea to keep extra cash in your checking account as a buffer. Also, have at least a small emergency fund in case you incur a large unexpected expense.

2. Pay-yourself-first budget

The pay-yourself-first budget is another simple budgeting method that focuses primarily on savings and debt repayment.

Paying yourself first is one of the golden rules by many financial planners. Each month you should remove a fixed % of your income as savings and keep it aside. Now use the remaining amount to spend on your monthly expenses.

So how will you ensure you are paying yourself first?

We do this by having two separate bank accounts.

  1. Income account – in which your salary/fees, basically any earnings, are credited each month.
  2. Investment Account – in which you shall transfer your savings from your salary account. This account will be for all your investments. You will make all your investments, for example, insurance premiums, mutual fund (SIP), deposits, and equity, from this account.

This system of having two bank accounts will ensure that you are saving first – as you MUST transfer a fixed sum of money from your income account to your investment account.

This budget is best for someone who struggles with saving each month or doesn’t want to focus too much on budgeting each expense.

3. Gullak Method of budgeting/ Envelope system budget

This budgeting method is similar to the zero-based budget but with one big difference: You do it all with cash. In an envelope budgeting system, you plan out how you’re going to spend your money each month and use an envelope for each spending category. Then you withdraw as much cash as you need to fill each envelope based on your budget.

As you go grocery shopping, for instance, take your grocery envelope and pay for your items with cash. If you run out, that’s all you can spend in that category for the month unless you want to take cash from other envelopes. Avoid raiding other envelopes too often, though, because it can cause a snowball effect and you can run out of cash before the end of the month.

The biggest proponent of the envelope system, so it’s a great option for people who espouse their beliefs about money, which focus heavily on paying down debt quickly and using cash, not credit cards.

But it’s not a good budgeting method for someone who doesn’t feel comfortable having that much cash on hand or prefers using credit cards or debit cards.

4. 50/30/20 budget

The 50/30/20 budgeting method is straightforward and requires less work than the zero-based and envelope budgets. The idea is to break down your expenses into three categories:

  • Necessary expenses (50%)
  • Discretionary expenses (30%)
  • Savings and debt payments (20%)

This budgeting method is a great option for newbie budgeters because it doesn’t require meticulous tracking of all your expenses. You can succeed with this budget as long as you know what counts as a want versus a need and put enough money toward savings and debt.

The main drawback is that the 50/30/20 rule might be unrealistic for people who have a lot of debt or have big savings goals because 20% isn’t a lot.

But the good news is that you can customize it to fit your needs. For example, you may want to consider increasing the savings and debt repayments category and decreasing the discretionary or necessary expenses categories.

In other words, don’t get stuck on the 50/30/20 proportions. Tailor the concept to your needs.

5. The ‘no’ budget

This “budgeting” method is based solely on your income and expected expenses and moving your money around each month with intention. That’s it.

Before You Start the “No Budget” Method, Do a Quick Assessment of Your Income and Typical Monthly Spending

  • Determine your income
  • Determine the total of your bills each month
  • Estimate how much your other spending costs per month
  • Figure out how many extras there would be for debt/savings/investing each month
  • Use these as a baseline number each month going forward

How to Implement the “No Budget” Method Every Month

Step 1: At the beginning of the month, as soon as you get paid, pay all your bills first.

Step 2: Next, save money or pay off the debt in the amount you’ve determined you can afford each month.

Step 3: Whatever is left over is yours to spend on your variable expenses until you get paid again.

Important: rules for using the “no budget” method

  1. Don’t use credit cards. this ensures you’ll never overspend.
  2. On the last day of the pay period/month, move any extra money in your bank account over to savings or to pay off debt
  3. Keep a buffer amount in the saving account just in case
  4. Check your bank account regularly
  5. Set up automatic investments and your bills
  6. Review spending at the end of the month 

While the “no” budget sounds easier than the other methods we’ve listed, it’s not always easy to tell yourself “no.” This budgeting method is best if you’ve demonstrated spending discipline in the past and are confident that you can continue that streak.

Also, it’s best if you use only a debit card with this budget because it’s tied directly to your bank account and automatically updates your balance.

Wealth Cafe advice:

The important thing is to create your own budgeting rather than trying to conform to someone else’s.

Do that and you will have clarity on how to reach your goals, and you won’t have to worry about being limited in your budget.

You cannot be in complete control of your money if you’re not budgeting in the best way for you.

Budgeting methodGood for…
1. Zero-based budgetTracking consistent income and expenses
2. Pay-yourself-first budgetPrioritizing savings over spendings
3. Gullak Method of budgetingMaking your spending more disciplined
4. 50/30/20 budgetCategorizing “needs” over “wants”
5. The ‘no’ budgetLowering and avoiding unnecessary spends


To conclude, there are different methods of preparing budgets, and there is no best method that fits all. Whatever you do, the important thing is that you develop the habit of managing your money in a way that helps you improve your financial health and achieve your goals.

To learn more about saving and investing enroll in our course: NM 101- Maximise your Savings

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