How to Choose A Budgeting Method

by | Apr 23, 2020

Choosing the right type of budget method for you is a tricky process. Many budgeting methods include dozens of budget categories which can get overwhelming fast. (I’m looking at you, Mint.) 

Over-categorizing your budget takes the fun out of enjoying the money you earn, and then ultimately makes you feel overwhelmed if there’s a slip up – leading to your budget falling apart.  

We want your budget working for you, not the other way around.

As a money speaker and coach, I speak to thousands of clients every year struggling to master their money. There are literally hundreds of different budgets out there to choose  from. Here are some common ones to name a few:

1. Zero-Based Budget 

The Zero-Based Budget is practiced under the belief of extremely constrained spending. All components of your budget have a balance of zero and must be built from the ground up. Every cent is accounted for, and assigned – you are tracking every penny. This budget is one of the more restrictive types of budgets out there but may prove to be extremely effective during circumstances of financial crises. 

Not everyone needs this type of budget and it does play to the mindset of “all or nothing,” which can have devastating costs to the individual if they spend too much and break their budget. For those who need this kind of strict structure, however, it’s a game-changer.

2. The Envelope Budget

The Envelope Budget, or “Cash Only Budget.” Because so much of spending is done through credit card transactions or touch pay applications, cash is almost a thing of the past. It becomes very easy for spenders to not realize that more money is going out of their accounts than in. Many people need to visually see the money leave their account to realize exactly how much they are spending. 

With the envelope system, cash is assigned into different categories (like, an envelope for entertainment and another for rent.) When the money is gone for the month, it’s gone.

Additionally, this is a really great way to set up automated transfers to savings accounts because you already have your spending money parsed out, and won’t need to worry about overdrafting. 

3. 50/30/20 Budget

This budget divides up your monthly net income (post taxes). It suggests that 50% of your net income should go towards your living expenses such as housing, utilities, groceries, transportation, and any debt payments that you have. When thinking about your “needs” budget, really think about the difference between a need and a want. Having this mindset also helps mindful spending with the rest of your net income.

About 30% of your budget should pay for the fun stuff, such as trying out that new restaurant, any self-care practices, or unnecessarily big purchases. (Yes, this includes subscription services such as Netflix.)

And 20% of your budget should be about building an emergency fund and paying future you, aka retired you. This 20% is the most important, as building wealth and financial stability will allow you the comfort to afford the rest of your expenses.

4. The Three Bucket Budget 

In my experience, the previously mentioned budget methods don’t work for most people. They involve a lot of overcategorization of expenses and stringent rules that make spending your money fearful instead of joyful. 

Charlie helps make the budgeting process easy and takes care of a number of financial priority tasks so you can stop worrying about the little details and start focusing on the big picture – like your retirement goals. 

So while you’re planning how much you need to put away in your 401(k), Charlie can monitor your account spending 24/7, give alerts for suspicious transactions, create spending summaries (how much you spend on coffee), and help find deals on services that you already use. 

Charlie, in conjunction with my method (coined the Three Bucket Budget), is similar to the 50/30/20 budget – except that there are no set percentages of how much money should be allocated to each category. Charlie helps me understand my financial picture. Based on Charlie’s finding and my goals, I create my budget for each bucket and set up automatic banking transfers into their corresponding accounts.

Here’s how it works:


This type of spending is everything you need to eat, sleep, breathe, move, and live.

Everything that is absolutely necessary to your life that you could not cut in case of a job loss: Things like rent/mortgage, insurance, groceries, loan payments, etc. 

Lastly, this might be a given, but: paying your regular loan and credit card payments are necessary expenses, not goals. They live in THIS category. 


The goals category is for the “big life stuff” like building an emergency fund, retirement, or a down payment on a house. 

For other goals – such as debt pay-off and emergency funds – you can set up an automatic transfer month from your checking account to a savings account so you don’t accidentally spend that money. Thinking about a high yield savings account also means that your money is working for you – earning extra dollars by sitting and lookin’ pretty. 

If your employer offers a retirement plan, it would be wise to opt into making a contribution per paycheck. This takes out the need to think about setting aside money for your retirement because the payroll department does it for you. If you don’t have a retirement plan at work, there are still plenty of options to open up, like traditional IRAs, SEP IRAs (for side hustlers and full-time entrepreneurs), and Roth IRA’s. 

The more goals you have, the more sense it makes to set up automatic transfers for each account, so you know exactly how much you have to spend on everything else. 


The last bucket is for fun spending. Your fun money has a budget method strategy too. It’s not meant for spending frivolously on just anything. Chances are there are things in your life, certain experiences or hobbies, that bring joy and fulfillment to your being. The fun money is meant to go towards spending that brings meaning and joy to your life.

You don’t have to stop spending money, you just need to stop spending money on things that aren’t important to you.

If you’re having a hard time thinking about what type of spending brings you joy, start by journaling your answers to the following prompts:

  1. What items or activities do you typically spend your discretionary income on every month? 
  2. Think about your purchases last month. Which purchases were worth it and which weren’t?
  3. Pick three categories that bring you joy (for ex. nesting, food, travel)
  4. Tally up how much money you’re spending on things you don’t care about vs. items that you do.
  5. Ask yourself if you need to reallocate your spending in this category. 

At the end of the day, creating a personal budgeting method that works for you doesn’t have to be complicated. Using simple tools like the Three Bucket Budget gives you freedom without the anxiety of being tied to a spreadsheet. If the 3 Bucket Budget interests you, find out more here

Your spending, savings, and budgeting goals will change over time. Once you’ve met a goal or the goal has changed, don’t panic or blow up your savings. Take some time to think back to your “why” you began saving in the first place. You most likely will need to pivot your goal or find out the new “why” to best prepare for future you. 

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