Whether you’re making $130,000 or $30,000, an essential aspect of living a comfortable life is optimizing how to spend (and save) money. Your top-line salary isn’t nearly as important as how you allocate it. Budgeting isn’t a ‘one-size-fits-all’ concept, YOU have to decide your own budgeting technique and methods and implement what works for you and what doesn’t.

Are you someone who likes to travel a lot? How often do you like to order-in food as opposed to cooking at home? Do you prefer buying name-brand clothes or enjoy the thrill of thrift shopping?

All these aspects based on your lifestyle, choices, income, etc determine the right budgeting strategy for you and should be taken into consideration before finalizing on a budget method.

Another important thing to ask yourself is, ‘Why do I want to budget?’ Is it because you want to retire early,  save for a rainy day, or save for a new car or home? These are crucial questions that can further help you make a decision.

There are many budgeting methods that can help you achieve your goal. We’ll go over some of them in this article to help you determine what is best for your needs and goals.

Envelope Method

The Envelope method is an all-time classic budgeting method. It’s simple, easy and doesn’t have any complicated tricks involved.

The idea behind this method is to compartmentalize your finances under labels and use the money accordingly. You will most likely be creating separate envelopes such as rent, utilities, gas, debt, insurance, etc. This ensures that your basic financial needs are looked after, you simply pick the required envelope and use the money from that when the need arises.

An advantage of this method is that if you ever fall short on cash from a particular envelope, you can use the money from another. This also helps you keep track of where you are spending the most money and where you need to save more.

One big disadvantage is that it’s cash-heavy, and in today’s digital currency landscape it can be difficult to implement this method. Another drawback of this method would be if you have a lot of fluctuating expenses, which could make it difficult for you to separate a fixed budget every month. This is something you need to keep in mind while using the Envelope Method.

The Envelope method is best suited for someone who has a steady source of income with a fixed spending strategy.

Zero-Based Budget

What if we told you that there’s a budget that requires you have $0.00 in your bank account at the end of every month.

Yes, that’s right. The Zero-Based Budget asks you to just one simple thing: make sure that your bank account has exactly ZERO dollars left at the end of every month.

You’re probably wondering, how and more importantly why?

The first step of following this method is to budget all of your expenses and savings. Once you’re convinced that there’s no further scope on expenditure, you empty out your account – regardless of what’s in it.

It doesn’t ask you to spend that money, the method encourages you to use the balance for tasks such as additional debt repayment or extra investment. The main aim of this method is to get you to spend money wisely in avenues that you might not have considered. The biggest advantage of this method is that it can help you pay off loans faster or increase your investment portfolio.

However, it does put you at a backfoot for any emergency scenario. This method is most ideal for people who are looking to pay off debts quickly and have a comfortable rainy day fund for unprecedented scenarios. It also requires micro-managing your funds and devoting time to plan out your expenses and savings before there is any balance left over.

50-20-30 Method

The 50-20-30 budgeting method is perceived as one of the more practical budgeting methods out there. It is a no-hassle method which has only 3 requirements based on needs, goals and wants :

50 – You spend 50% of your monthly income on your basic needs such as rent, transport, gas, etc.

20 –  You save 20% of your monthly income for your financial goals like paying off your debt or saving for retirement.

30 – You spend 30% of your income on leisure activities such as eating out, travel, etc

This method is perfect for someone who doesn’t want to compromise on their lifestyle but also achieve a level of financial stability. You can alter the percentage based on your lifestyle and needs thus making it very easy to execute for even those who are new to the budgeting lifestyle.

This method is perfect for those who can stick to a set budget and for someone whose goal is to pay off debt quickly while maintaining the freedom of not having additional expenses that could potentially hinder their budget.

An important tip to keep in mind is to leave some buffer in each category or in a particular category where you are most likely to overspend, this will help you stay on track without any added pressure.

80-20 Method

The 80-20 Method is a rather simplified version of the previously listed method, spend 80% of your monthly income and use the remaining 20% for your savings. This is most ideal for people who don’t like budgeting or are new to it and want to simply test the waters.

This method gives you the flexibility to spend as you wish without having any financial constraint or a tight budgeting system. This system is also highly ideal for someone with a variable income, as it gives you the required financial freedom.

The 80-20 method may not be the most ideal for someone who wants financial independence at an early age as that requires a higher level of savings. If you’re just starting out or are at a higher level of income bracket, and don’t want to spend too much of your time budgeting, this is the perfect method for you.

The “No Budget” Budget

Are you someone who absolutely hates the concept of budgeting? The “No Budget” Budget is just for you.

It asks that you keep a superficial track of your expenses so that you are meeting your monthly requirements, and anything above that is your prerogative. This method is for those who don’t have the time to track or compartmentalize their expenses. It’s best suited for those who are at a comfortable level of income and don’t wish to spend the time and energy every month.

One big drawback is that if you’re not cautious about your spending, you could run the risk of money crunch. This method is not recommended for those with an early retirement plan or with a concrete debt repayment plan.

It is preferred that you use this budget only if you’re financially ready for any unexpected expenses such as healthcare or urgent repairs. Having a concrete saving backup is important if you want to follow this style of budgeting as it leaves little room for backup if you overspend or mismanage your finances,

The DIY Method

All the methods listed above are mere frameworks of what you can do to achieve your financial goals. You can pick and choose from all these methods and implement those aspects which are the most appealing and practical for you.

You may spend some time in trial and error making some mistakes along the way if you try this approach, but eventually, you’ll zero in on the one that’s best for you.

At the end of the day, it is you who’s going to be spending your hard-earned money. Every individual has a different perception, standard of living, lifestyle and most importantly, unique circumstances.

The only thing you should keep in mind while selecting a budgeting method is your ultimate financial goals.

Your lifestyle and financial stability will play a huge role in deciding which budget is best for you. Every aspect of your daily life, from the $5 coffee to the cab ride home after a fun Friday night should be taken into consideration, as it is always the little things that tend to tip the scale and often demotivate you from sticking to your budget.

You can MacGyver your budget and make it work for you rather than have you work for it by anticipating your expenses in advance and staying ahead of the budgeting curve. If you follow all these methods and implement them to suit your goal, you should be on track to achieve them sooner rather than later.

Ultimately, you’re free to choose the core principles from these methods for both long-term and short-term goals. Creating a realistic budget is far more important than an ambitious one that you’ll have a hard time following through.

By keeping all these pointers in mind, you can create and maintain a sustainable, enjoyable and easily replicable budget every month and set an example within your circle when it comes to financial stability, foresight and a smart way of living.