One size doesn't fit all when it comes to budgets. Weigh the commitment levels, pros, and cons to find your match.
Budgeting isn’t all about holding back. It’s about building financial confidence, giving yourself permission to spend on what matters, and—ultimately—progressing toward your financial goals.
No matter where you and your bank statements are starting, an intentional, realistic budget can be a game-changer.
Here are three types of budgets to consider.
The 50/30/20 method is versatile and straightforward. It involves allocating your monthly take-home pay (after taxes) into three categories:
50% for essentials, like groceries, bills, your rent/mortgage, debt payments, and insurance.
30% for spending on dining or ordering out and entertainment.
20% for personal saving and investment goals.
To pull it off, use a budgeting app or spreadsheet to track these categories, set up automatic transfers to savings, and review your budget quarterly. The best thing about this method? Its flexibility. Some months might require slight shifts between categories, and that’s OK.
Pros
- Easy to understand and implement
- Provides clear spending guidelines
- Allows for personal enjoyment while saving
- Flexible enough to adapt to your priorities
Cons
- Less detailed tracking
- Might not work for those with irregular incomes
- Can feel too broad for people who need more specific guidance
Traditionally, envelope budgeting meant physically dividing cash into labeled envelopes. You can still do that. Or, for a more digital-friendly version, use budgeting apps and separate accounts to similarly visualize your spending.
Begin by reviewing your spending patterns and coming up with personalized categories, like groceries, utilities, dining out, entertainment, salon appointments, what have you. Then create “envelopes” and assign a monthly allowance for each one. This is your spending money.
The catch is: When an allowance runs out, you’re done spending in that category for the month. If you truly must spend more in one category, pull from another and make note of any adjustments that might be needed next month.
Pros
- Provides clear/visual boundaries
- Helps avoid overspending
- Creates high spending awareness
Cons
- Can be time-consuming to set up
- Requires consistent tracking
- Might feel restrictive as spending patterns/needs fluctuate
The final approach is the most intentional of the three; it involves budgeting down to the dollar.
List your expenses as granularly as possible: your rent/mortgage, utilities, groceries, entertainment, personal care, savings contributions (by type!), debt payments, everything. The idea is to allocate every dollar you having coming into these categories, so your income – expenses = 0.
To pull it off, use a budgeting app or spreadsheet to track every financial choice. If you spend less than expected on something, reassign those funds to additional savings or debt repayment. If you spend more than expected, cut costs elsewhere or do what you can to increase your earnings.
This one isn’t easy. But after a few months of tweaking line items and benchmarks, you may be able to create a near-perfect picture of your spending.
Pros
- Super detailed financial tracking
- Forces intentional decision-making
- Helps avoid unnecessary expenses
- Maximizes financial awareness
Cons
- Time-consuming
- Requires consistent, precise tracking
- Can feel overwhelming for beginners
- Not flexible
Getting ahead of yourself? Learn more about setting goals and what budgeting is all about.
You can bring these three options to life in countless ways. Maybe one is perfect for you as outlined, maybe it’ll take some trial and error to find your match, or maybe you’ll find yourself working through various methods as your life changes.
That’s all valid. The financial awareness you’ll be gaining may end up being as valuable as any dollar saved.
What’s next?
Does your budget leave room for additional retirement savings?  to adjust your contributions. Don’t have an employer-sponsored retirement account? We can help you set up your own retirement savings with an IRA or Roth IRA account.
