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  • Kimber Severance

5 Different Types of Budgeting Methods

Updated: Nov 5, 2021

Whether you're creating a budget, trying to monitor your spending habits, or saving money, finding the right budgeting method is essential.


One of the first things you'll want to think about when researching budget methods is what kind of budget you need. You might need it for the short-term or long-term. You could create a monthly budget, weekly budget, yearly budget, personal finance budget, or small business budget.

Budgets are a helpful way to track your spending habits and save money. If you have ever felt stuck by budgeting before, you might just need a new budgeting system.

There are many kinds of budgeting systems for businesses and personal use. When you find the right budget for you, it makes your money make more sense.

The Basic Budget System

The basic budget includes the general rules that every budget tries to cover and helps you plan and organize them.

A basic budget needs to account for the money coming in and the money going out. All of it needs to balance out so that you aren't living too close to zero (paycheck to paycheck) and so you can have some cushion funds leftover each month.

A basic budget might include what's generally called fixed expenses and varied expenses.

Fixed Expenses

A fixed expense is anything that you pay for on a regular basis that has a price that stays the same. This would include things like housing, bills, or subscriptions.

Varied Expenses

A varied expense is the opposite of a fixed expense. It's anything that you probably will spend money on, on a regular basis, but the prices are not always the same. This would include things like food, transportation, clothes, or household supplies.

The Key to Good Budgeting

The key to a great budget is to make varied expenses behave like fixed expenses as much as possible.

You can do this by allotting certain monthly allowances to each varied category so you don't overspend on food or clothes and end up without enough money for something important like rent or utilities.

Luckily, there are many promising ways to organize and set up a budget that will help set you up for budgeting success.

The Cash Envelope System

A cash envelope system is a cash budget system that uses cash and envelopes to set aside funds for each section of your budget.

It's like a manual budget. Instead of setting aside funds for each budget category in your mind with a calculator, literally, put funds into each budget category with cash and envelopes.

How to Use the Cash Envelope System

Just get yourself some envelopes and write the name of each budget section on each envelope. Then, when you get your paycheck in cash, divide up those funds accordingly into the envelopes.

Now, instead of using cards and digital bank accounts to make all your payments and purchases this month, you'll use the funds kept in your organized cash envelopes.

The Benefits of the Cash Envelope System

This budget method is simple and helps people to not accidentally overspend. The exact amounts you need will be available in each envelope and you won't be able to overspend unless you rearrange your enveloped cash.

If you've always struggled with living paycheck to paycheck or successfully sticking to your budget, then this method is for you. It's incredibly straight-forward with no margin for error.

The Prepaid Card Budget System

A prepaid card is like a gift card in debit or credit card form. A Target gift card is great, but you can only use it at Target. A prepaid debit card is a regular debit card with reloadable funding abilities.

How to Use the Prepaid Card Budget

All you have to do is find a local store that sells prepaid debit cards and buy one. You might want to buy a few prepaid cards for the main budget categories you need the most help controlling.

Then you'll reload funds each month, or after each paycheck, onto each card. For instance, maybe you'll have a card for rent and utilities, and another card for groceries. Then you can just keep the amount you want to spend on those main budget sections on those cards.

The Benefits of the Prepaid Card Budget

With prepaid cards you can get the absolute control of a cash envelope budget without having to move to cash or stop using easy and convenient debit cards.

Cash can be a hassle to deal with, but with prepaid cards, you can essentially do the same thing as a cash envelope budget—physically organizing your money, while not forsaking the ability to easily swipe to pay for things.

The Budget Apps System

If you don't want to set up a separate system outside of your bank account, then your best option for budgeting is to do your own bookkeeping or download a budgeting app and connecting it to your existing bank accounts.

There are countless budgeting apps out there—some are better than others. Do your research and read the reviews to find which one will work best for you.

How to Use Budgeting Apps

Most budgeting apps will have you connect your bank accounts to the app. If you invest you might also be able to connect your investment accounts to the app.

Then you can use the app's budgeting system to make your budget. The app will then help remind you to stick to your goals and keep you posted on how you're doing.

The Benefits of Budgeting Apps

A budgeting app is great because you can automate all of your budgeting in one system without having to take out cash, get prepaid cards, or do your own calculating and bookkeeping manually. Instead, the app will take care of all that for you.

The Budget Spreadsheet System

A spreadsheet for your budget is the manual way to track your spending habits and keep yourself posted on how you're doing with keeping to a budget.

How to Use a Budget Spreadsheet

Open up a file in your favorite spreadsheet program like Excel or Google Spreadsheets. Personally, I really love Google Spreadsheets, but Microsoft Excel has tons of great features for spreadsheets once you figure out how to use them.

For something more simple, or if you're new to spreadsheets, then try starting with Google Spreadsheets.

Then use your spreadsheet to make sections of your budget, listing your fixed and varied expenses. Use spreadsheet features to create formulas to automate budget calculations.

The Benefits of a Budget Spreadsheet

By using spreadsheets to budget, you can almost completely automate your system. You can also be as detailed or general as broad as you want to be.

Spreadsheets can also be easily shared if you are budgeting with a family member, roommates, a partner, or business associate.

In Conclusion,

Personal finance should be just that—personal. If a method isn't working for you, then try something different!

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