Best budgeting methods: 5 proven strategies to manage your money

Things to think of when creating a budget

Budgeting doesn’t just ensure you aren’t spending beyond your means. It’s really about goal setting. Do you want to build up an emergency fund? Pay off your debts? Buy a house? Reduce your weekly expenses overall? A budget is going to help you get there. 

You also need to identify what your wants and needs are. If you pay $3 for coffee each day, that’s over $1,000 a year. Creating a budget helps you decide what you actually need. 

1. The 50/30/20 budget

The 50/30/20 budget is all about percentages. It's a great thing for people who want to keep it simple. For this plan you allocate 50% of income to necessities, 30% to wants, and the remaining 20% to savings and debt repayment. 

It’s a great option for someone who is new to budgeting. As long as you can successfully categorize what is a want and what is a need, it’s relatively easy to keep on track with this budget. It’s also easy to customize to fit your income and spending habits.

2. The pay-yourself-first budget  

With this budget method, you don’t have to track your spending as much as with other budgeting methods. It’s a way of prioritizing savings. With the pay yourself first budget, each time you get paid, you set aside a specific amount of money for debts/bills and savings payments. Setting up automatic bill payments for as many bills as possible can make it easier.

The rest of the money you can spend however you want. It’s a budget that prioritizes staying on top of your savings and debt repayment goals.  

Pros:  

As this method focuses on ensuring your savings grow, it’s a great budget for setting yourself up for the future. You also don’t need to track all of your spending down to the dollar this way because you’ve already taken care of the most important things each time you get paid.

Cons:  

While this does help you save money and pay down debt, it won’t get you out of trouble if you have a lot of debt. People with lots of debt may find themselves financially stretched if they need to set aside lots of money each month for debt payments.   

3. Priority-based budgeting

Priority-based Budgeting helps you control your money by ranking your expenses and financial goals by importance. 

You start by paying for essentials like rent, utilities, groceries, and debt. 

Next, you allocate funds to non-essential spending, like entertainment or dining out, only if money remains. 

This approach ensures you cover critical needs first, limits discretionary spending, and gives you a clear view of where your money goes.

Pros:

This method ensures essentials and debt payments are always covered first. It reduces overspending on non-essentials and gives you a clear picture of your financial priorities. Over time, it can help you save more and stay on track toward your financial goals.

Cons:

Priority-based budgeting can feel restrictive, especially if you enjoy flexible spending. It may require frequent adjustments when unexpected expenses arise, which can be frustrating. Additionally, it doesn’t always leave room for fun or discretionary spending, which might make it harder to stick with long-term.

4. Zero-based budget  

For the zero-based budget, you look back at the past two or three months of spending and create a template for how much you expect to spend this month using that data. Subtract all your expenses, including savings and debt payments, from your income until you reach zero. 

You may see you spent about $300 on groceries each of the past few months, so you subtract that from your income. Do this for all your regular savings and expenses, and you’ll see exactly how much money you can allocate to each spending category. This budgeting method isn’t just for essentials; you also put aside money for entertainment and other miscellaneous spending.

Pros:  

The zero-based budget allows you to micromanage your money and help ensure you don’t overspend on your regular purchases. It’s also easy to keep track of in an app or a spreadsheet.

Cons:  

This kind of budget requires the most forward thinking and planning. It’s almost impossible to do without a spreadsheet, app, or pen and paper. There’s also less room for error, and unexpected large purchases may throw the budget off. 

5. The “NO budget” budget  

The NO budget means you don’t spend money you don’t already have. With this budget, you pay with debit or cash as often as possible.

All you have to do is to keep track of your bank balance. It also helps if you set up automated bill payments for any reoccurring expenses so you don’t need to worry about remembering them. You also make sure you have an appropriate amount set aside each month for savings and debt payments.

Pros:  

Because you only really need to track your bank balance, this is the budgeting method that requires the least forward thinking. If you use debit and cash as much as possible, you also likely avoid big credit card bills. 

Cons:  

While this sounds like the easiest budgeting method on the list, it requires incredible discipline. We all know that saying 'no' to ourselves isn't easy. If you know you tend to spend impulsively, this probably isn’t the method you want for your money.

What to do when budgeting can’t fix your debt problems

When budgeting alone isn't enough to solve overwhelming debt problems, a Licensed Insolvency Trustee can help.

Licensed Insolvency Trustees understand that financial difficulties can happen to anyone. They provide completely judgment-free consultations, focusing on practical solutions rather than past mistakes. Your trustee works with you to find the best path forward based on your specific situation.

They'll review your debts, income, assets, and expenses to identify all available options and clearly explain each path you can take to become debt-free. Your first consultation with one of BDO’s Licensed Insolvency Trustees is free of charge.

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