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The 5 Best Budgeting Methods To Help You Afford Your Dream Life
You need to have a budgeting method that works if you want to stop living paycheck to paycheck, never stress about money again, and be able to afford your dream life.
This is important, though — a budgeting method that works for me, might not work for you.
Since starting to budget (using an automated method), I always have enough money for bills, necessities, and fun, I’ve paid off over $6,000 in debt, and have saved more money than I ever thought possible.
If that sounds like something you want for your finances, keep reading to discover the best budgeting method for you!
What are the 5 best budgeting methods?
The 5 budgeting methods that we’ll be covering are:
For more in-depth explanations of any of the budgeting methods listed, simply click on their link to be brought to their ultimate guide!
- How To Start Budgeting (When You Don’t Know Where To Start)
- The Automated Budgeting Method (So Your Budget Never Fails!)
- Budget-By-Paycheck: Everything You Need To Know
- The Zero-Based Budget: Take Control Of Your Finances Today
- 50/30/20 Budget: How To Get Started
- The Cash Envelope System: How To Stop Poor Spending Habits
- How To Track Your Budget So It Doesn’t Fail
1. the BUDGET-BY-PAYCHECK BUDGETING METHOD
Budgeting by paycheck is a great budgeting method to get started with because it is simple and straightforward.
With this budgeting method, you’re simply going to create a plan for your money every time you get paid.
To get started, you’re going to need:
1. Your pay schedule (and average take-home pay)
2. Your bill due dates & amounts
3. A calendar
Simply follow these steps:
1. Mark on your calendar each time you will be paid and for how much money
2. Record each time you have a bill due and for how much money on your calendar
Pro Tip: Use different colored pens for each week
It should look like this:
- easily calculate each pay cycles budget
- visualize how much money you have for food, gas, and other necessities
- calculate how much money you’ll need from your last paycheck for next weeks bills (if applicable)
This is what your final budget by paycheck calendar should look like:
The best part about using a budget by paycheck method is that:
Living paycheck to paycheck isn’t a big deal anymore and you’ll always be able to easily see how much spare money you have for savings, debt repayment, and fun!
Contrary to what a budget-by-paycheck may sound like, this budget will help you STOP living paycheck to paycheck. And FAST.
2. THE AUTOMATED BUDGETING METHOD
Why do you ask?
Well, when you automate your budget, you can kinda, well, stop budgeting.
This sounds counterintuitive but hear me out:
- ensure you always have the right amount of money in your account for bills
- allow you to automatically save money and pay down debt
- free up money for personal spending
To get started, follow these steps:
1. Calculate your total monthly income (after taxes)
2. Calculate your total monthly fixed expenses
3. Calculate your total monthly variable expenses
4. Calculate how much extra money you have each month
- 1 account for your fixed expenses (bills)
- 1 account for your variable expenses (food, gas, etc.)
- 1-3 accounts for savings (if you are saving for multiple things and like the separation)
- 1 account for debt repayment
- 1 personal spending account
This seems like a lot of bank accounts, but you’ll understand the method to my madness in a sec.
1. Divide your total fixed expenses by your total monthly income – This is the percentage of your paycheck that should be directly deposited into your bank account for bills.
2. Divide your total variable expenses by your total monthly income – This is the percentage of your paycheck that should be directly deposited into your variable expenses account.
3. Divide your extra monthly income by your total monthly income – This is how many percents you have left to divvy up among your savings account(s), debt repayment account, and personal spending account.
The final piece of the puzzle is to set up automatic bill pay so your bills will be automatically withdrawn from your bills account when they are due.
Then, you’re done!
The best part is:
When you’re finished setting up this budget, you’ll always have enough money in all your accounts for your lifestyle and you’ll never, ever miss a due date!
3. THE 50/30/20 Budgeting Method
The categories included in a 50/30/20 budget are:
- 50% for your needs (essential expenses)
- 30% for your wants (personal spending)
- 20% for saving (or debt repayment)
Here’s the deal about this budgeting method:
But, if you have plenty of cash and want to start spending it more responsibly, this budget is perfect for you.
To create a 50/30/20 budget follow these steps:
1. Calculate your monthly income after taxes
2. Multiply your monthly income by 0.5 to see how much you should be spending on your needs
3. Multiply your monthly income by 0.3 to see how much you should be spending on your wants
4. Multiply your monthly income by 0.2 to see how much you should be saving
Related Reading: How To Use The 50/30/20 Budgeting Method To Rock Your Finances
4. The cash envelope system
This budgeting method is all the rage these days.
Here’s how it works:
You break down your budget into categories, as usual. Then, place cash for each category into a designated envelope and spend accordingly.
To start using the cash envelope system, withdraw money from each paycheck for your envelopes such as for groceries, gas, and personal spending.
Here’s the deal, though:
To make this budgeting method work, you must not take money from other envelopes to cover overspending in another budget category.
Make sure you’re sticking to your budget by tracking your spending in a budget binder.
Get the rundown on the cash envelope system of budgeting and find out for yourself!
5. zero-based budgeting method
The concept of this method is simple: The sum after subtracting your monthly expenses from your monthly income is zero.
This does not mean, though, that you’ve spent all of your money.
It means this:
All of your money has either been spent OR has been transferred into an account for such things as saving, debt repayment, personal spending, etc.
Who is this budgeting method meant for?
A zero-based budget is kickass for anybody trying to pay down debt or save money quickly because you will be intentional with your money.
There is no room for poor spending habits when you use a zero-based budget, ensuring that all your hard-earned cash is being used efficiently.
How to track your budget (So it doesn’t fail)
Because let’s face it: If you do not track your budget, you will not stick to it.
I know this because this was me (and probably you, too).
1. The Budget Boss Binder – $9 ($27 value)
A 40+ page printable and digital budget binder designed to help you track your spending, your bill pay, your debt repayment goals, and your savings goals. Included you’ll find budgeting templates, daily spending logs, bill pay checklists, and more. Our Budget Boss Binder is un-dated so you can use it forever! Click the button below to see what you’ll get.
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2. Honey Money ($50 value)
Honey Money is an online resource to track your budget. Within your dashboard, you can create your budget, track your budget, create debt repayment and savings goals, and more. If you aren’t a pen and paper kinda person, I highly recommend this budget tracking resource.
It’s Time for you to Take Action!
You’ve completed the first step on your budgeting journey: Researching (and hopefully choosing) one of the best budgeting methods for your lifestyle.
Now, it’s time to move onto step two:
Creating, implementing, and sticking to your budget!
Here are some action steps to help you get started:
1. Choose one of these budgeting methods (if you haven’t already)
2. Use a template for your budgeting method (or create your own) and write down your budget
4. Review your budget in a month and make adjustments (if necessary)
If you’d like a step-by-step guide to setting up your first budget, sign up for our free Budget Boss eCourse below!
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