3 Personal Budgeting Types and How To Make Them Work For Your Lifestyle

August 24, 2020 Savanna Pruitt 5 min read
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If you’re anything like me, you know deep down that you need to come up with (and stick to) a budget, but you can’t seem to find a system that works. There’s a ton of information out there about budgeting, but a lot of it is outdated and doesn’t make sense for a millennial lifestyle. Here’s a rundown of a few common personal budgeting mistakes you might be making and a list of some budgeting types that might actually work for you and your lifestyle.

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Budgeting Mistake #1: Neglecting Your Savings Account

You need to designate a percentage or set amount of your income each month for your savings account. When it comes to budgeting, always assume you’re going to need funds available for unplanned events. Whether your AC goes out in your car or your dog ends up at the vet with a stomach ache, you can rest easy knowing you have at least part of the expenses covered.

Check out this episode of The Ambitious Freelancer about stretching your income and setting realistic goals for saving.

Budgeting Mistake #2: Setting Too Many Goals

Part of budgeting includes setting goals to pay off debts and make large purchases. If you set too many big goals at the beginning, you might get overwhelmed and give up altogether.

When you’re starting out, try setting one large goal or two to three smaller goals for your finances and savings. Those goals will change as your lifestyle and financial situation evolve, so you need to evaluate them regularly.

Budgeting Mistake #3: Living Outside Of Your Means

It’s almost always tempting to spend more than you have, especially if you’re trying to keep up with your friends and their lifestyles. You don’t have to sacrifice all the nice things and fun experiences. You do need to evaluate what you can afford, though.

If you want to ball on a budget, check out thrift stores, store rewards programs, and free events in your area.

Where Should You Start With Personal Budgeting?

If you’ve made some serious budgeting mistakes and you need some general advice for getting your finances in line, here’s a great post about creating a realistic budget in college. It applies even after you graduate and move into the “adult world.”

Ready to dive headfirst into the world of budgeting and are wondering which method will work best for you? Check out these personal budgeting types.


Personal Budgeting Type #1: Zero-Sum Budgeting

Zero-sum budgeting involves taking your income and assigning a job or purpose to every single dollar until you have zero unspent dollars. This budgeting type aims to help you make sure your money has a purpose. It eliminates random spending.

Who Is Zero-Sum Budgeting Good For?

Zero-sum budgeting requires you to use your last month’s income to pay for the current month’s expenses. If you have at least a month’s worth of income saved up, or if you can plan to do so, zero-sum budgeting might be an excellent option for you. This type of budgeting tends to work best if your income is the same each month.

How Can You Make Zero-Sum Personal Budgeting Work For You?

The biggest step with zero-sum budgeting is determining where your money goes (or needs to go) each month. You’ll designate your categories (rent, car payment, utilities, savings, etc.) and determine how much of your income needs to go to each category.

It’s important to remember that some months will have unique categories. November and December will likely need a spending category for gifts, and you might want to include a travel category for the summer months.

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Budgeting Type #2: Envelope Budgeting/Cash Budgeting

Envelope budgeting involves pulling out cash each month and placing it into envelopes based on specific spending categories. Before you start envelope budgeting, you need to evaluate exactly what your spending categories are. You also need to decide precisely how much of your income needs to be devoted to each category. You’ll create envelopes for your rent, student loan payment, groceries, etc. and fill them with the exact amount you need for each category.

Who Is Envelope Budgeting Good For?

If you’re comfortable exclusively using cash for your expenses and spending, this system could be great for you. Some people have an easier time-saving money and budgeting it if they can physically hold it in their hands and understand exactly where it’s going.

There’s no temptation to charge that cute purse on your card if you aren’t carrying one!

How Can You Make Envelope Personal Budgeting Work For You?

The most crucial step of this system is clearly outlining your spending categories. If you don’t, you’ll probably get confused and forget which envelope you should be pulling funds out of for each expense.

It’s a good idea to prep the night before and stick any cash you’re going to use the next day in your wallet. If you do this, you won’t be caught without a way to pay for what you need.

If you need help tracking your bills and figuring out which categories you need to budget for, read this post about creating and using a bill-tracking spreadsheet.


Budgeting Type #3: “Paying Yourself First” Budget

This personal budgeting system involves precisely what it says: paying yourself first. With this system, “paying yourself” really means putting money into savings accounts before paying your bills and taking care of other expenses.

You’re paying your future self.

Who Is “Paying Yourself First” Budgeting Good For?

If you’re trying to fatten up your emergency savings account or if you have a specific purchase you’re saving for, this is an excellent personal budgeting method.

How Can You Make A “Paying Yourself First” Personal Budgeting Work For You?

You need to have your detailed expenses laid out before you determine how much to “pay yourself” each month. If you put too much into savings, you won’t have enough to cover your bills. The system won’t work that way.

It’s a good idea to set up a designated portion of each paycheck to go into your savings accounts automatically. Automatic savings will help you be less tempted to manually transfer less into savings than you should be.

If you want to make your money work for you, look into getting a savings account that will accrue a decent amount of interest over time.


Conclusion: Personal Budgeting Types You Will Love

Budgeting doesn’t have to be a scary or intimidating process! The most important thing is to evaluate your lifestyle and goals before deciding which personal budgeting plan makes the most sense for you.

What are your favorite tips and tricks for creating a budget that works with your lifestyle and sticking to it?

1 Comment

  • Christy Garris September 16, 2020 at 9:57 am

    I can say that I have a mixed type of budgeting. Every month I put a fixed amount in my savings account – ” paying myself”. I spend the rest of my money up to the last one – “Zero-Sum Budgeting”. Since my salary is not fixed, I can earn more or less in some months, but I always save almost 30% for myself, and with the rest of the money I buy food and pay my bills. Also from my income, I sometimes have to save up for large-scale purchases (because I do not use my savings account until an emergency happens).
    I can’t say that my system is efficient, I am a terrible spender and could save more. But the main thing is that I do not get into debt and live within my means.

    P. S. Interesting podcast!

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    About Amanda

    Hey Y’all!
    My name is Amanda Cross, and I am the blogger behind The Happy Arkansan. I am a blogger, freelance writer, and podcaster. When I am not creating content for any of my content online, I can usually be found baking, watching YouTube, or napping. I love helping millennials and young adults navigate the mess that is adult life. Keep reading for my thoughts and experiences.

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