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There are many ways to increase your income, investments, and eventually your wealth. At the same time, it is crucial to put some thought and planning into managing your expenses to build a financially sustainable lifestyle, which is where budgets come in. 

Many people assume managing a budget is a cut-and-dry, one-size-fits-all system which may prohibit them from trying to find a budgeting method that works for them. A Gallup poll found only about 1/3 of Americans (32%) maintain a household budget. Perhaps unsurprisingly, a study in 2015 found that 38% of Americans spend about equal to their income and 18% spend more than their income.

Those figures show why many households need to find a budgeting method that works for their circumstances. When you create a process around your budget that works at any income level and build good budget habits, you can take on anything life throws at you. With that in mind, here are a few different methods of budgeting that can work for you:

Zero-based budget

The zero-based budget has a very simple concept that holds up consistently well: use every single dollar you have down to zero. Now, that doesn’t mean spend every dollar you have, it means give every dollar you have a purpose.

As soon as you get money, you’ll have to decide what that money needs to do. You can budget on a weekly, bi-weekly, or monthly basis – whatever works for you. Most people align their zero-based budget to their pay schedule. If your income varies month over month, don’t worry: one of the first jobs you can start is assigning your money to establish a ‘slush fund’ with enough money to fund a month’s worth of expenses so that you’re never behind on your bills.

This budget method is great for curbing impulsive spending, because instead of buying something based on your mood, you’ll have to wait until you can assign the required amount of dollars to that purchase. It also allows for minute control of your money; literally down to every dollar.

Cash is king

Popularized by personal finance gurus like Dave Ramsey, the envelope method is a no-fuss, rigid method of budgeting. With the envelope method, you designate an envelope (physical or digital) for every category you spend money on, from rent, insurance, utilities, to gym, date nights and celebrations. Then, you only spend the money that’s in the envelope for that category.

This budget method can be difficult to maintain at times. For example, you might head to the grocery store toward the end of the month, and realize you only have $50 left to spend. You might have to get creative with meal prep for that week. When your cash is gone, you cannot spend more. While it may seem a bit harsh at first, the pragmatic nature of this method is a big reason behind its popularity.

The 50/30/20 budget

A proportional budget is an uncomplicated method of budgeting that has a little more slack than the previously mentioned envelope method. It’s widely known as the 50/30/20 rule based on the book All Your Worth by Elizabeth Warren and Amelia Warren-Tyagi and is pretty self-explanatory: you spend 50% of your money on necessary items (needs like rent, transportation and food), 30% on discretionary expenses (wants), and put 20% toward debt and savings.

A disadvantage of this system is that it does require a bit of tracking and some judgement calls on what counts as a ‘need’ versus a ‘want’. An advantage is that you can apply these proportions to decisions about renting versus buying, vacations, debt repayment plans and more.

The proportional budget method is also easily modified to reflect your priorities. For example, if you have student loans or other debt that you are trying to pay off quickly, you can change the proportions to 40/10/50 and put half of your income toward high interest debt.

The (automated) pay yourself first budget 

Arguably the simplest method of budgeting among all the methods mentioned above, the pay yourself first method requires you to set up a regular, recurring percentage of your income to go straight into saving and investing for your future self.

If possible, set up an automatic deposit from each paycheck to go into a designated savings account. Once a good percentage of your pay is set aside for your future self, the amount coming into your checking account is fair game for all expenses and discretionary spending.

If you are confident in your abilities to spend reasonably, or you are a frugal person by nature, you probably don’t need to track every single dollar you spend. This method allows you (mostly) carefree spending after savings.

All these budgeting methods have their own advantages and disadvantages, so it’s important to pick a system that works for you. There’s no right or wrong way to budget and success does not look the same in absolute terms for everybody. As long as you’re fulfilling your short term needs and saving for long term goals such as building generational wealth, your budgeting method is a success.