Manage Money

Personal Budgeting Methods (Keep Track of Your Money!)

Budgeting is incredibly important as an adult and can sometimes be a little daunting, but it doesn’t have to be super complicated. There are many simple, effective methods that one may use when it comes to personal budgeting.

In today’s fast-paced and complex financial landscape, mastering the art of personal budgeting is crucial for achieving financial stability and reaching your long-term goals. With an array of budgeting methods and tools available, finding the right approach can feel overwhelming. 

This comprehensive guide will help you navigate the world of personal budgeting, introducing you to various strategies and tools tailored to different financial situations and preferences. Read on to discover the most effective methods for managing your money, along with practical tips and resources to empower you on your journey toward financial success.

The methods discussed include the 50/30/20 rule, envelope budgeting, zero-based budgeting, the “no budget” budget, and percentage-based budgeting, among others. Each method has its own advantages and disadvantages, and the article explains them clearly, allowing readers to choose the best method for their personal situation.

Moreover, the article also lists helpful tools for budgeting, such as Google Sheets, Mint, Empower (formerly Personal Capital), Goodbudget, and GnuCash. These tools can indeed help individuals manage their personal finances more effectively.

Best Personal Budgeting Methods

Envelope budgeting

The idea behind envelope budgeting is very simple. All that’s used for envelope budgeting is cold hard cash to use as spending money. To use this budget method correctly, allocate the money to separate categories, then withdraw whatever amount of money you need from your bank account. You will then separate the cash into envelopes labeled to match your categories. If you struggle with overspending, this is a great way to keep your spending at a minimum. Once all the cash is used up, no more money can be spent.

There is one major thing to watch out for when using this method. One downside of this method is that it requires you to carry cash, which can be inconvenient or unsafe. There is a chance that the money might get misplaced or stolen if it’s not in a safe area. Make sure to always use a physical wallet or a notebook to put cash in so you can better avoid losing it. 

Additionally, it may be challenging to plan for expenses that don’t fit neatly into a specific category. You may have to pull money from one envelope and put it in another.

Zero-Based Budget

This is the method I use. With the zero-based budgeting method, you distribute your income among various categories and expenses until you have no money left, ensuring that each dollar has a designated purpose and is fully accounted for. You decide what categories you need, just make sure that every dollar you bring home has a place to go. .

This method can a little bit time-consuming for the first few months because there is so much tracking and planning that comes with it, but if done correctly and regularly, it will be very worth it in the long run.

While this method ensures that every dollar has a specific purpose, it can be time-consuming to track and allocate expenses. It may also be difficult to plan for unexpected expenses that arise throughout the month.

For more details, check out this article on the zero-based budget.

“No Budget” Budget

The only thing that you need to pay attention to in this method is your bank account balance. You don’t even have to track your expenses. You will want to automate paying your bills every month and try to make them the same amount every month. If you aren’t great with numbers and haven’t had super great success with budgeting in the past, this method is perfect for you.

The “no budget” budget can be a little bit risky just because you aren’t tracking the numbers as much, so you might spend a little more money than you realize. This budget option may be better for those with a higher income.

Percentage-based Budgeting 

This method involves allocating a percentage of your income to different categories, such as housing, transportation, and food. This can be customized to fit your individual needs. 

This method may not work well for those with high essential expenses, and it can be challenging to define what expenses fall into each category.

There are two common budgeting methods that fall under the broader category of Percentage-based Budgeting.

50/30/20 Rule

This method is very simple, very common, and is one of the most effective ways to budget your money. It’s a budgeting method where you simply divide your after-tax income into 3 different spending categories. 50% for needs, 30% for wants, and 20% for paying off debt or savings. By using this method, you can put your money to work more efficiently.

The 5/30/20 rule was, in part, popularized by the book All Your Worth: The Ultimate Lifetime Money Plan. This book was written by Elizabeth Warren and her daughter Amelia Warren Tyagi. This book highlights that you don’t need a complicated, time-consuming budget to keep your spending in check.

The different budgeting categories, for example, include:


  • Rent
  • Bills
  • Transportation
  • Insurance
  • Loan repayments
  • Groceries


  • Clothes/accessories
  • Dining out
  • Holidays
  • Memberships
  • Subscriptions


  • It’s often surprising how quickly savings can add up. When you are saving 20% at a time, you will be shocked at how much you saved by the end of the year!

For more details, check out this article on the 50/30/20 budget.

There is also a slightly modified version, called the 50/40/10 rule. For more details, check out this article on the 50/40/10 budget.

60 Percent Method (60% Method)

Similar to the 50/30/20 method, the idea behind the 60 percent method is simple. Keep your committed expenses at or below 60 percent of your gross income. Some of those basic expenses may include basic food needs, household expenses, insurance, and all taxes and bills.

The 60% method is a budgeting approach that suggests allocating 60% of your after-tax income to essential expenses, 20% to financial goals, and 20% to flexible spending.

Essential expenses include housing, utilities, groceries, transportation, and other necessary bills. Financial goals may include saving for retirement, paying off debt, or building an emergency fund. Flexible spending can be used for discretionary expenses such as dining out, entertainment, and travel.

The 60% method provides a simple and flexible framework for budgeting, but it may not work for everyone. Your individual financial situation and priorities may require a different allocation of funds. It’s important to regularly evaluate and adjust your budget as needed to ensure that it aligns with your goals and supports your financial well-being.

Personal Budgeting Methods Summary

There are various personal budgeting methods available, each with its own advantages and disadvantages. I listed the most popular methods above, but here is a more complete list of methods:

  • Envelope budgeting

This method involves dividing your income into different categories and placing cash into separate envelopes for each category. You can only spend the money in each envelope for its designated purpose.

  • 50/30/20 budgeting

This method involves dividing your after-tax income into three categories: 50% for needs (such as housing, food, and transportation), 30% for wants (such as entertainment and vacations), and 20% for savings and debt repayment.

  • Zero-based budgeting: 

This method involves allocating all of your income to different categories and expenses until you reach zero. This ensures that every dollar is accounted for and has a specific purpose.

  • Percentage-based budgeting

This method involves allocating a percentage of your income to different categories, such as housing, transportation, and food. This can be customized to fit your individual needs.

  • Priority-based budgeting

This method involves listing your expenses in order of importance and allocating your income accordingly. This ensures that your most important expenses are covered first.

  • Pay yourself first budgeting

This method involves setting aside a percentage of your income for savings and investments before paying your bills or expenses. This ensures that you prioritize your long-term financial goals.

  • Spreadsheet budgeting

This method involves using a spreadsheet to track your income and expenses. You can customize the spreadsheet to fit your individual needs and easily update it as needed.

  • Mobile app budgeting

This method involves using a budgeting app to track your income and expenses. Many apps offer helpful features, such as automated categorization and notifications when you overspend.

  • Annual budgeting

This method involves creating a budget for the entire year, taking into account any irregular expenses, such as vacations or holiday gifts. This can help you plan and save for these expenses ahead of time.

Choose a budgeting method that best suits your financial situation and personality, and stick to it consistently to achieve your financial goals. I recommend doing your budget at least monthly, although there are some people who do it weekly.

Helpful Tools for Budgeting

There are so many budgeting tools out there that can make your life a lot easier. Most of them are free and very easy to use! Here are some great budgeting tools.

Google Sheets

All you need to do to create a budget in Google Sheets is open a new document, create income and expense categories, decide which budget period to use (I typically do a monthly budget), minimize your time and commitment by using simple formulas, input your numbers, and lastly,  keep your budget updated.

Mint: Budget Tracker & Planner

Mint is a free budget tool available on their website and in mobile app form. Mint is very simple to use and categorizes your expenses for you. It shows you your income, expenses, savings, goals, credit score, investments, and net worth. It easily connects to your bank account and has many security features. It’s very dependable and safe to use. There is also a Mint budgeting app that you can download on your phone that will help you budget on the go.

I’ve used Mint for over a decade now and can say it really helps when doing my budget. For example, I have all my bank accounts linked and can see all of my transactions for the past month.

Empower (formerly Personal Capital)

I tried this app back when it was Personal Capital, and it appeared to be well-organized and useful. However, I didn’t keep using it because I’m used to the way Mint works. My suggestion is to choose one of these two apps that work best for you. This brand is one I’ve seen promoted a lot because of its high affiliate payouts.

Goodbudget Smartphone App

The Goodbudget smartphone app is also free and allows users to plan their spending based on the envelope budgeting method. It’s the envelope method gone digital. Users are only supposed to spend what’s in their certain “envelope” categories. This app is also very safe to use and has many security features.

GnuCash Desktop Software

This desktop software tracks users’ bank accounts, income, expenses, and investments. It also offers basic accounting abilities and functions, so it could potentially manage a small business’s payroll and invoicing. No one will have any physical access to your data, so this software is completely safe to use. This software can be found on Windows, Mac OSX, and Linux-based systems. It is also available in an app for Android users.