Seven Different Ways to Budget (and How to Pick the Best One for You)

There are some basic, inescapable facts aboutadult life.

You need toclean your house.

you gotta pay attention towhat you eat.

And you absolutelyneed to have a budget.

In other words, you need abudgeting system(and abackup budgetin case of financial disaster).

Heres a rundown of seven popular budgeting systems and who theyre best suited for.

Itdivides your entire expense sheet into three categories: Needs, wants, and savings.

Who its for:If youve never lived with a budget before, this is a great starter option.

Its simplicity makes it easy to see at a glance what it’s possible for you to afford.

Using the Envelope System, you first work out your monthly budget as usual.

Then you literally stuff cash into those envelopes.

When a particular envelope is empty, you cant spend any more in that category.

Who its for:Folks who suffer from lifestyle inflation.

Zero-based

How it works:Azero-based budgetfocuses on income and outlay exclusively.

First, calculate your monthly post-tax income.

If they arent exactly equal, its time to adjust the budget.

If you have a shortfall, adjust an expense down until you have zero dollars left over.

By earmarking every dollar deliberately youll be in full control of your moneyand there wont be any surprises.

Reduce:Where can you trim the fat?

Its also a useful exercise even if youve got a different system that works for you.

How it works:Kakeibois a very old, Japanese budgeting system.

How it works:Avalues-based budgetis more flexible than other budgets.

You first decide on your prioritiesthe things that matter to you.

Then you allocate money towards those priorities proportionallyand you adjust those proportions as your priorities shift over time.

In a values-based system, you would put more money into your travel fund for the time being.

Who its for:Anyone who finds other budgeting systems too rigid.