6 Budgeting Methods For Financial Success and Building Wealth

Ready to stop living paycheck to paycheck and start going after your dream life? Budgets aren’t “one size fits all” – try one of these budgeting methods to see which one works for you so you can finally control your money and succeed at budgeting.

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Want to know a secret?

A budget is just a set of two lists.

You’ve got the money that comes in to your account, and the money that leaves it.

The aim is to to have more coming in than going out. But when it comes to the actual tracking there’s no right or wrong way to do it.

So if the thought of budgeting makes you feel anxious then it might be time to try a different method.

After all, there’s no one-size-fits-all budget. Some people like to micro-manage every penny. Others might prefer a more relaxed approach.

Perhaps you’re frustrated with traditional budgeting. Well, if it isn’t working for you, don’t give up.

You can switch things up and tweak different budgeting methods until you find one that works for you.

Once you find a budgeting method you’re comfortable with you’ll finally be in control of your money. And that feels good, doesn’t it?

So lets take a look at some of the more common budgeting methods.


This the classic budgeting method, and the one that most people think of when they think of a budget.

It can be really straightforward to set up.

  1. List your income at the top. If you earn extra money through side hustles or a part time job then include that as well.
  2. List all of your expenses.
    Start with your fixed necessities, like rent/mortgage, utilities, taxes
    Then list everything else.
    If you’re making regular deposits in savings or pension accounts then include those too.
    Sometimes it’s tricky to figure out what you’re spending on variables (things like groceries, entertainment, clothes and beauty), so if you’re not sure then look through your past 3 months of bank statements.
  3. Add up all your expenses and subtract the total from your income.
    Hopefully you have a positive number – you can now plan what to do with it. If you have debts then you can funnel it towards paying them off. Or save it up!
    If you’ve ended up with a negative number, don’t panic. Take a look back at all of your expenses and see what you can get rid of or cut back on.


The traditional budgeting method gives you a really clear picture of your finances.

It allows you to break everything down into a lot of detail, so is great for untangling messy accounts and figuring out where all of your money is going.

If you’re struggling with debts or overspending then this method is great for identifying problem areas and seeing where you can make changes.


It can be time consuming to set up.

The amount of detail could initially be overwhelming if you have a lot of things happening with your income and expenses, especially if you’re not detail oriented.

Proportional budgeting

Proportional budgeting is a bit more relaxed than the traditional budgeting method, so if you’re not super detail oriented then this might be the one for you.

With proportional budgeting you basically divide up your post-tax income into different groups, or proportions.

50/30/20 is one of the most common proportional budgeting splits, and was popularised All Your Worth book.

So let’s break it down.

The numbers in proportional budgeting are just percentages.

Your aim is to limit your spending in each group to that percentage. So for 50/30/20:

  • 50% of your income goes towards needs, e.g. rent/mortgage, utilities, groceries
  • 30% is for your wants, e.g. Netflix, entertainment, shopping
  • 20% goes towards savings, investments or debts


This can be a great alternative to the traditional method if you’re not quite so comfortable with micromanaging your money.

Assigning percentages rather than specific amounts can feel less restrictive. If you don’t want to feel limited or deprived then this might make it easier for you to stick to your budget.

It’s also really flexible.

If you’re on a more limited income then you might need to adjust it to something like 70/10/20. On the flip side, if you want to save more or want to pay off debts as quickly as possible then you can bump up that proportion.

It’s really simple to modify the percentages to make it work for you and your goals.


It can be hard to separate out your wants from needs.

Your needs section should only really include the vital essentials.

This can get tricky when you think of your groceries, where some of the things in your basket are clearly needs (fruit & veg, bread, milk etc.), but other things (that tub of Ben & Jerry’s…) fall more in the want category.

Just don’t overthink it too much, or you’ll risk tying yourself up in knots.

Proportional budgets are also tricky if you have a very limited budget where you need to carefully account for all your expenses.

Common advice would be to cut down on your expenses to make them fit into those percentage brackets, but this might not work for your circumstances. You can only cut back on so much, and if you’re on a low income you’re likely to have a lot less wiggle room.

Pay yourself first

Also known at the 80/20 approach, this budgeting method is really just a looser offshoot of proportional budgeting.

With this method you make sure that 20% of your post-tax income is funnelled directly to your savings or investments as soon you’re paid (so you’re paying yourself first!).

The remaining 80% is used for everything else without needed to differentiate between wants and needs.


This is one of the more relaxed approaches to budgeting. Like the standard proportional budgeting methods, it’s very open to customising, so you can adjust it to fit your lifestyle and goals.


It’s not so great if you have a tendency to overspend and need a little more structure in your budget.

Half payment method

Big monthly bills can take a huge chunk out of your income, and this can create cash flow issues if you’re paid twice a month instead of monthly.

In these situations you can end up paying the whole bill with one paycheck, which can leave you struggling to find money for groceries or other variable expenses until your next paycheck comes in.

If that’s you then you might find the half payment budgeting method helpful.

With this approach you take your monthly recurring bills and divide them in half. With each paycheck you take that halved bill money and set it aside. So when your second paycheck comes in you have the full bill amount and can settle it in full.

This helps you to spread the cost out throughout the month. Your income and outgoings are the same as they usually are, but you’ve redistributed the burden on each paycheck which makes things less stressful for you.


The half payment method can be a great way to help you manage your cash flow more effectively.

It helps you to spread the cost of your bills across the month which can feel less overwhelming than trying to settle every bill in full with each paycheck.

It can also be easily be adjusted if you’re paid weekly instead of fortnightly – just set aside a quarter of each bill instead of half.


This might not be the most practical way of managing your finances if you’re paid once a month.

It can also take a little work to set up – you’ll need to get half a month ahead to be able to start putting it into action.

You’re going to need to figure out a way of keeping track of all your half payments.

You’ll also needs some self-discipline so that you don’t touch all those half-payments until the full bill is paid.

Are you going to set up a separate account to funnel them into, withdraw the cash and store it, or will you ring fence the money in your regular current account?

If you want to give this method a try it might be worth easing your way into it with one or two smaller bills until you get the hang of things and see if it works for you.

Cash envelope system

Are you swiping your card for every payment and then wondering where all your money went at the end of the month? If you’re nodding your head then switching to a cash based system might be for you.

When you’re using your card for everything it can be hard to know when to stop spending.

Using cash gives you a very tangible way of tracking where your money is going and how much you have left.

This is one of the old school budgeting methods, but it’s still really popular because it works.

You start by splitting your budget into different categories.

It’s up to you how you do this, but you might have things like:

  • groceries
  • travel
  • entertainment
  • gifts
  • toiletries/beauty
  • clothing

Now grab a bunch of envelopes and label them with each category.

Decide how much money you want to assign to each category. Withdraw the cash and stuff each envelope with your budgeted amount.

Each time you go shopping or to the supermarket bring your envelope along and pay with the cash in your assigned envelope.

So you pay for your groceries from your grocery envelope, petrol money comes from your travel envelope, coffee from your entertainment envelope, etc.

Pretty self explanatory.


It works.

It’s a great system if you’ve got no impulse control when it comes to money. Once the cash in your envelope is gone, it’s gone so it’s very effective in curbing overspending.

Being able to actually see how much physical money you have left is also really helpful in disciplining you when it comes to your spending.

There’s a whole psychology behind paying with cash rather than card. You tend to be a lot more restrained with your spending when you’re handing over cash compared to plastic.

And having to handing over cash also allows you to be more mindful when it comes to your spending. This can help you to focus on your goals, and makes you more likely to ask yourself whether you really need that purchase.


You need to be organised for this to work.

The first obvious thing is that you need to physically go to the bank or an ATM to withdraw all your money for the month. This can be a burden if you’re short on time, or if you live miles away from the nearest bank.

And then you need to remember to bring your envelopes with you when you go out. If you forget your envelope you need to go back and get it.

There’s also the stress of having to carry all of that cash with you. What happens if you lose your envelopes, or if they get stolen?

It’s worth only carrying the cash that you need at any one time to help avoid that stress, so you’ll need to plan ahead to make sure you have what you need.

Paying by cash might also means that you miss out on some bank account or credit card rewards.

Zero-Sum Budget

With a zero sum budget you need to use every penny of your income. The goal is to get to zero at the end of the month.

This doesn’t mean that you have to spend every penny.

But what it does mean is that you have to have a plan or a strategy for it all.

You start by recording all of your expenses so you can see where your money is going. This lets you decide whether you’re spending it in the right places, or whether you need to make adjustments to make maximise every penny.

The bottom line is that everything has to be accounted for.

If you get to the end of the month and you have an extra £100 leftover, what are you going to do with it? I guarantee that if you don’t make a plan for it, it’ll disappear and you won’t even know where it went.


This system forces you to be proactive.

That makes it one of the most compelling budgeting methods you can use.

You have to really think about where your money is going – or where you want it to go.

If there’s a goal that you’re working towards, is your spending helping you get there?

A zero sum budget makes you give every penny of your income a purpose. And this can give you a lot of control over your finances, helping you to make the most of your money.

It also easy to combine this system with any of the other budgeting methods. It can be very powerful in helping you meet your financial goals when you combine this system with traditional budgeting, or cash envelopes.


It can be time consuming.

You need to budget and account for everything, and track all of your income and outgoings.

Like traditional budgeting, this can easily overwhelm you if you’re not great at digging into the details.

It can also be slightly unnerving to see a zero balance at the end of the month. Just remember that having zero in your account doesn’t mean that your money is all gone. It’s up to you where your money goes. You can budget for a “fun fund” or keep a separate easy access account as a cushion.

Budgeting for variable expenses can be awkward with this system. You might find it easier to overestimate these types of expenses – any surplus can always be transferred into savings at the end of the month.

It can also be tricky to use if you have a variable income, although it’s not impossible.

If this is your situation you might want to budget for your lower income months. Whenever you have higher income months you could then funnel some money into an easy access savings fund to help you out if your income dips.

What do you do to make budgeting easier?

Do you use one of these budgeting methods, or something different? Let me know!