Popular budgeting strategies

13 October 2020

OK, you’ve decided you’re budgeting, calculated your income, defined your goals, and even downloaded one of the dozens free budgeting apps. What next? Next, you need to choose your strategy.

Many classic budgeting strategies offer different approaches to control your spending, here are some of the most popular out of them.


Zero-based Budget

This strategy is also frequently called traditional as it’s something you usually imagine when you hear the word “budget”. It’s a simple list of expense categories (you can see an example here) with the target amount you will spend alongside each category. 

This method forces you to spend some time each month to create a plan for your spendings and savings.

The zero-based approach works for those who want a hands-on approach or have just started to think about creating a budget. Also, it’s one of the easiest ways to budget nowadays as there are hundreds of free apps to help. 


50/30/20 budget

This budget sets some basic rules on how to break down your monthly cash flow. It suggests that you spend 50% on necessary living expenses like rent or mortgage, food etc., 30% on fun things like new shoes, and the remaining 20% you save for the future. The approach helps you to accumulate some money towards your emergency fund or a goal quickly and not be overwhelmed with the idea of budgeting as it balances what you should do with what you want to do. 

This method is ideal for those concerned with big-picture financial information as it limits the number of budget categories you work with. 


The Pay-Yourself-First Budget

You’ve probably already guessed how this one works. Firstly, you put some money aside for the long-term goals, and then you figure out how to live on the remainder. The best idea is to set automatic top-up for your saving and investing accounts and have your money taken even before you realize they’ve landed on the main one. The Pay-Yourself-First strategy works best for those who are struggling to save for big goals. 

Because you decide for yourself in advance, it’s a good way to avoid having to make constant budgeting decisions for yourself.


Values-based budget

With this method, you make a list of the values and prioritize it from most important, to least important. You might have your rent or mortgage up the top, all the way down to the cost of buying a round of cocktails for the bar. 

Then you calculate the cost of each point and picture how far you can stretch your paycheck. If your savings are taking a big squeeze, find expense lines that can be shrunken down on the list so you can prioritise the important stuff. 

If you hate numbers and live by your emotions, this might be the strategy for you. Seeing things written out on a page can help you take stock of all of your important costs, as a way to figure out which ones aren’t as essential. 


As we are different, there is no one size fits all solution, so remember that all the strategies can be easily combined and tailored to suit your own unique situation. 

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