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Budgeting Basics: 9 Types Of Budgets To Use

Budgeting basics: make the most of your money

In this post, we will go over some of the budgeting basics so that you can make the most of your money. Making a monthly budget is one of the most important things you can do in managing your finances. A budget can help you track your spending, save money, and make sure you are using your money in the way that you want to. There are a lot of different types of budgets, but there are some basic principles that all budgets should follow.

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Budgeting Basics: Types Of Budgets

Budgeting is the process of creating a plan to spend your money. This spending plan is called a budget. Creating a budget can help you make better decisions about how to use your money and can help you reach your financial goals. There are different ways to budget your money and we’ll look at some of the popular types of personal budgets below.

types of personal budgets
types of personal budgets

Traditional Monthly Budget

A traditional monthly budget is a financial plan that outlines expected income and expenses for the month ahead. Making a monthly budget is quite straightforward. It is a way to track spending and ensure that all necessary expenses are covered while any additional income is allocated to savings or other goals.

A traditional budget typically includes categories of expenses such as housing, food, transportation, utilities, insurance, debt repayment, savings, and discretionary spending. The budget will also include estimated income from all sources, including wages, investments, and any other income.

Once the budget is set, it is up to the individual to adhere to the budget and ensure that all expenses are covered. This can be done by tracking spending and sticking to the budget’s limits for each category. Any money left over can be used for savings or other goals. If expenses exceed the budget, it is important to look for areas where spending can be reduced or income increased.

Envelope System

The envelope system is a budgeting method where a person puts cash into different envelopes labeled with specific budget categories. When they want to purchase something, they take the cash out of the appropriate envelope. This helps to keep track of spending and ensures that the person does not overspend in any one category. This budgeting type is another that is easy to get started with.

Zero-Based Budget

Another common method is to use a zero-based budget. This budget starts with your income and then subtracts your expenses. The goal of this budget is to have your expenses equal your income at the end of the month. This doesn’t mean you should spend all your income – you should ensure you have a plan for any left over cash such as saving into a contingency fund.


50/30/20 Budget

The 50/30/20 budget is a simple budgeting system that can help you manage your finances in a manageable and efficient way. This system is based on the idea that you should spend no more than 50% of your after-tax income on essential expenses and needs, 30% on wants and discretionary spending, and 20% on savings and debt repayment.

Essential expenses and needs include rent, utilities, food, healthcare, transportation, and other necessary expenses. This category should not exceed 50% of your income. Wants and discretionary spending include entertainment, dining out, vacations, and other lifestyle spends. This category should not exceed 30% of your income. Finally, 20% of your income should be directed towards savings and debt repayment. This includes setting aside some funds for a rainy day, or for larger future expenses such as a car or a home.

The 50/30/20 budget is designed to make sure that you are able to meet your basic needs and still have some funds to enjoy life. It is important to note that this budget is not set in stone, and you should adjust it to meet your personal needs. However, it is a good starting point for those who are new to budgeting or need help getting their finances in order.

Goal Based Budget

A goal based budget is a budgeting system that focuses on specific goals instead of adhering strictly to a traditional budget. This type of budgeting is often used by individuals, couples, and families to help them save money for a specific purpose.

Goal based budgeting begins by identifying a goal and then figuring out what it will take to achieve that goal. This might include setting a timeline, estimating the cost of materials, and calculating how much money needs to be saved or earned each month in order to reach the goal. Once the goal and associated costs have been established, the budgeter can then begin to allocate funds towards the goal.

The budgeter will then allocate funds to cover their day-to-day expenses, such as rent, utilities, and grocery bills, as well as any other recurring bills. The goal-based budgeter can then determine how much they can afford to allocate towards their goal each month and set aside the necessary funds. This will help them stay on track towards achieving their goal and ensure that they do not overspend.

The goal based budgeting system is highly flexible and can be adjusted as necessary to accommodate any changes in the goal or budget. It also allows for the budgeter to prioritize their goals and allocate different amounts to each one. This way, they can focus their resources on the most important goals and still have enough left over to cover their day-to-day expenses.

Overall, a goal based budget is a great way to help budgeters stay focused on their goals and ensure that they stay on track towards achieving them. It also allows for flexibility and can be adjusted as needed.

Learning the budgeting basics will help you in managing your finances better
Learning the budgeting basics will help you in managing your finances better

Spending Cap Budget

A spending cap budget is a budgeting method that limits how much an individual can spend in any given month. It can be used to help manage finances, save money, and stay within a responsible budget.

The spending cap budget works by setting a predetermined limit on how much money an individual can spend each month. This limit is typically set by looking at the individual’s current income and expenses and subtracting any necessary expenses from that number. The remaining amount is then divided into a set amount for spending and a set amount for saving.

Once the spending and saving amounts have been determined, the individual should stick to the budget by only spending the predetermined amount on non-essential items. This might mean foregoing certain activities or purchases, but it’s important to remember that the goal is to remain within the spending cap budget.

If the individual is able to stay within the budget, they can then start to save the money they’ve set aside. This money can be used to pay off debt, save for a future purchase, or invest in something.

The spending cap budget is a great way to keep track of spending and ensure that one’s finances are managed responsibly. It’s important to remember, however, that it’s not a one-size-fits-all solution, and each individual will need to adjust their spending limit according to their own unique financial situation.

No Spending Budget

A no spending budget is a budgeting strategy in which you don’t spend any money at all. It involves tracking your income and expenses and setting a limit on how much you can spend.

To start a no spending budget, you’ll need to track your income and expenses. This means you’ll need to figure out exactly how much money you have coming in each month and how much money you’re spending. You can use budgeting software to help you do this. Once you know your income and expenses, you’ll need to set a limit on how much you can spend each month. This limit should be based on your income minus your expenses.

Once you have your limit set, you’ll need to stick to it. This means you won’t be able to buy anything that isn’t essential. You’ll also need to find ways to entertain yourself without spending money. This could include activities like reading, cooking, or going for a walk.

You’ll also need to make sure you’re paying your bills on time and avoiding late fees. This means you’ll need to budget for the essential bills like rent, utilities, and food.

Finally, you’ll need to be disciplined and stick to your budget. This means you’ll need to say no to any impulse purchases and find ways to stay within your budget. This could include using coupons and cashback, shopping around for the best deals, and avoiding buying things you don’t really need.

No spending budgets can help you save money and reach your financial goals. However, it’s important to remember that budgets aren’t set in stone and you can adjust them as your circumstances change.


Anti-budgets are a little more relaxed types of budgets that prioritizes you putting however much you want to your savings first. The remainder is then used for your bills and necessary spending and anything left over can be used to spend how you wish.

Effective budgeting basics
Effective budgeting basics

Benefits Of Budgeting

1. Improved Financial Security: Budgeting allows you to plan ahead and ensure you have enough money to meet your financial obligations. This helps to reduce stress and provides financial security.

2. Increased Savings: By tracking your spending and setting limits, budgeting can help you save more for the future.

3. Better Money Management: Budgeting can help make you better at managing your finances and making decisions about where your money is going. You can make sure your money is being used for the most important things and not wasted on impulse purchases.

4. Reduced Debt: By setting limits on spending and allocating money to debt repayment, budgeting can help reduce your debt over time.

5. Improved Credit Score: Paying bills on time and staying within your budget can help you improve your credit score. This can help you get better interest rates or access to more credit in the future.

6. Easier Financial Planning: With a budget, you can plan for future expenses and make sure you have enough money to cover them. This makes it easier to pay for large purchases or plan for retirement.

Budgeting Basics Conclusion

Now that we know the budgeting basics and some of the different types of personal budgets, we can start to make the most of our money. There are many ways to save money and live a comfortable life on a budget.

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