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6 Different Ways to Budget That Work

6 Different Ways To Budget That Work
Do more with what you’ve earned.

Financial advisors for successful professionals, executives, and business owners.

As a cash-flow-based financial advisor, I have created hundreds of unique financial plans. Some plans focus on building passive income, while others focus on retirement strategies. Each plan is truly as unique as the individual they are built around. However, the single most common thread among all plans is that they ALL focus on the client’s cash flow: what money is coming in and what money is going out. Unless your net worth is eight figures or more, mastering your cash flow is critical if you want to achieve financial independence. Yes, even if you are making $500K+ per year, you need to know what you are spending your money on and you likely need to limit this amount.

One of the single most important tasks when achieving financial freedom is to better understand your spending needs vs. your spending wants. If you know what you spend your money on and if you have control over this aspect of your life, it can be extremely powerful and life-changing. Unfortunately, nobody enjoys living under a budget and very few like to track their spending habits. As such, we have identified 6 different ways for you to track your budget. Finding the method that works best for you will help you become more financially independent.

1. No Budget – Budget

Okay, I know that I said that creating a budget is key. But there is a way to live within a set expenditure amount without really living under a budget. The No-Budget budget is an easy way to limit your spending by automating most of your expenses and savings targets.

The No-Budget Strategy

The No-Budget strategy begins with automation. The premise is that when all saving and investing is taken care of, the consumer can spend in line with his or her checkbook balance, and no more.

Here’s how to budget with the no budget:

  • Determine savings and investing buckets such as retirement, college savings for children, vacation fund, and unexpected expenses.
  • Create distinct accounts for each bucket. For example, a 401(k) and/or Roth IRA is ideal for retirement savings. For college savings, a 529 plan or standard taxable brokerage account works well. The shorter-term savings goals for emergencies and vacations can be combined into one account.
  • Direct monthly amounts into each account – retirement, college, saving (this includes the vacation and unexpected expense category) – directly from a paycheck or checking account. For the self-employed workers, auto-transfer from the working account into the three distinct saving and investing buckets.

Here’s how to implement the “No Budget” budget. Justin’s annual income is $120,000 before taxes and $96,000 after taxes. Justin’s monthly net income is $8,000.

Monthly, he auto-transfers $1,500 or 15% of his $10,000 gross income into his workplace 401(k) account.

Justin auto-transfers from his paycheck, $400 per month into a 529 plan to save for his children’s college expenses.

The last auto-transfer goes into the vacation/emergency savings high-yield savings account. Over the years, he has built up this account and saved more than he’s withdrawn. That means Justin can save $400 per month to keep his vacation and unexpected expenses account flush.

After the aggressive savings and investing of $2,300 per month, Justin has $5,700 per month to spend.

He can spend the $5,700 in any way that he and his family decide with confidence that their financial future is secure.

6 Different Ways To Budget That Work2. Manual Spreadsheet Budgeting

My wife, Jill, prefers to track our family spending by hand, with a spreadsheet. Her goal is to keep spending within a specific range and be aware of how much she spends in every area. When spending goes beyond our determined range, we know which category we can scale back.

Jill shares why she budgets with this method:

“I’m a visual person, and I like to see how much money we make, how we spend it, and what we are saving at the end of each month. My goal for manually tracking our spending is that I want to know how much money we can save. If we are spending too much money on a specific expense, I know exactly where we can cut back. I feel more comfortable knowing that we are prepared for our retirement, our kid’s college, and for taking our dream vacations.”

Jill is an “old school” budgeter and she even balances the checkbook by hand.

She creates a new budget spreadsheet each year, where she inputs our monthly income and spending figures. She defines the spending categories such as utilities, mortgage, homeowner’s association fee, insurances, vehicle expenses (including gas, maintenance, and insurance), grocery, education, healthcare, clothes, hair/nails, gym membership, gifts, charity, etc.

We use a debit card and a credit card for our spending so that it is easy to track our expenses. Note that we always pay our credit card off every month. NEVER CARRY A CREDIT CARD BALANCE.

Several times per month, Jill transfers the debit and credit card transactions to her spreadsheet. Most bills are paid manually, via a bank transfer with only a few on “auto-pay.”

Unexpected expenses come out of our emergency fund savings account.

This attention to detail ensures that money management is intentional.

“We currently save roughly 20% or our income. As our income grows, I hope to increase this figure by keeping our expenses relatively fixed.” Jill says.

For those interested in the excel spreadsheet budgeting strategy, here is an excel budget template that I send out to my clients.

6 Different Ways To Budget That Work3. 50/20/30 Budgeting Rule

A take on the No-Budget budget, the 50/20/30 budget has an aggressive saving and investing component as well as a conservative spending facet. This strategy structures the budgeting process to ensure wealth-building. The method can be used with spreadsheets or apps and guides the income and expenses categories.

The 50/20/30 budget starts with after-tax, take-home pay.

50% for Essentials

Direct no more than half of the take-home pay for necessary items. These expenses are unavoidable and include:

  • Housing
  • Food
  • Transportation
  • Utilities

The percentage allotted to each essential’s category can be adapted to the geographic location and lifestyle of the budgeter. One’s values also influence this category. If a luxury car matters then one might offset the vehicle expense by choosing to eat more simply or swap a vacation for a staycation.

20% for Saving and Investing

Saving and investing is clearly important. This is the financial security category which encompasses building wealth and squashing debt. If necessary, the saver can temporarily trim this category if an unexpected major financial expense occurs.

The saving and investing category includes:

  • 401(k) contributions
  • Investment account contributions
  • Roth and traditional IRA investing
  • Debt payments
  • Savings account contributions

The greater the commitment to saving and investing, the greater the likelihood of reaching financial security and independence. This category may require a perspective shift for younger or more extravagant folks to move away from spending and towards saving.

30% for Personal Expenses

Consider these optional expenses. The most successful budgeters understand the difference between wants and needs. Personal expenses are the “wants” and not the necessities. The maximum allotment to these expenses is 30% of the take-home pay.

Personal expenses include:

  • Cell phone plan (beyond the basic plan)
  • Cable
  • Dining out, snacks, and coffee outside the home
  • Gym membership
  • Miscellaneous subscriptions
  • Weekend getaways

Some discretionary spending has evolved into necessary expenditures. To win at the 50/20/30 budgeting, pay attention to the true necessities versus discretionary wants.

The 50/20/30 approach works with spreadsheets, apps or other methods that drive the spending, saving and investing decisions.

Bonus: Why You Need to Work with a Fiduciary Financial Planner 

6 Different Ways To Budget That Work4. Free apps

It seems as though a new budget app is launching every month. These tools simplify tracking, spending and saving. They also offer invaluable money education. Below are three free budget apps to streamline money management tasks.


Wally is great for the tedious task of expense tracking. You simply snap a picture of your receipts to enter the information and it shows all of your accounts in one place (savings, loans, credit cards, etc). The app allows you to plan payments and gives you a 360-degree money view that includes your income, expenses, and savings, which will help improve your money habits. There are also paid add-ons within Wally.


Mint is great for budgeting and helps guide daily spending and categorizes expenses. After linking accounts, the app suggests budgeting goals based on prior spending. The user can then adjust the amounts as needed.

The Mint app calculates the average spending by category so the user can see his or her spending and how to change it, if necessary.

The user is alerted to over-spending by category and missed payments. Mint offers a complete financial picture and guides current and future spending and saving.


This freemium budgeting app excels at spending management. Like Mint, it links to financial accounts for an all-in-one financial picture. The app tracks income, savings, and bills. PocketGuard analyzes bills and recommends better deals for monthly expenses such as phone, cable, and internet service.

There are also charts and graphs that assist in projecting future income and expenses.

The free version of PocketGuard, however, is limited to tracking bank transactions. For $4 per month or $20 per year, the PocketGuard Plus Membership allows users to track cash and adds more “pockets”.

5. Zero-Based Budget

Zero-based budgeting is a strategy that can be used with a variety of budgeting apps or tools. The concept is that your income, minus expenses, equals zero. It means every dollar that you make has a job.

The zero-based budget doesn’t mean that you are not saving anything.

The zero-based budget process is:

  • Write down all income, including paychecks, small-business income, investment income, child support, and any other cash.
  • Write down each expense every month (use whichever method works; spreadsheet, app, etc.). This includes housing, food, cable, phones, transportation, charity, and more.
  • Add in seasonal expenses such as holiday spending, taxes, insurance payments, birthday gifts, vacations, and all other infrequent expenses.
  • Add in debt expenses
  • Add in your required savings amounts, including those needed to be added to your investment portfolio

Now that all income, expenses, and savings amounts are accounted for, subtract the expenses and savings from your income. Under the zero-budget strategy, this should equal zero.

If this number is negative, then either increase your income or decrease your expenses.

If this number is still positive, then direct more to your savings and investment portfolio.

The premise of zero-based budgeting is to keep the budgeter in control of their money. If the dollar lacks a job, it will get spent! It’s undoubtedly better to direct that extra money to wealth-building saving and investing.

As the master of one’s money, the consumer has the freedom and confidence to know that they are in charge of their financial future.

6 Different Ways To Budget That Work6. Bonus Budgeting – More Apps

Here are more budgeting apps: free, freemium, and paid. There are so many varieties of money management and budgeting resources today that there’s no excuse for avoiding the budget.

Try an app or budgeting strategy until the right strategy emerges!

You Need a Budget (YNAB) – Built on the premise that every dollar needs a job (like zero-based budgeting) and three other money rules. The additional YNAB rules encompass acknowledging and funding expenses, flexible spending rules, and spending only money that is at least 30 days old.

Budgeting is crucial for sound financial management and security. With countless strategies, tools and apps, it’s easier than ever to take financial control. In fact, simply jotting down expenses with a pen and notebook is a start and leads to feelings of control. It’s fascinating how awareness and attention towards spending and saving can prompt better money decisions.

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