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Here are seven approaches to budgeting


Managing your personal finances requires a budgeting system (and a backup plan for financial emergencies). However, everyone handles money differently, so there’s no universal solution for income management. While any system is better than financial spontaneity, selecting a budgeting approach aligned with your life goals and personality enhances your chances of success and long-term adherence. Here’s an overview of seven popular budgeting systems and their ideal users.

The 50/30/20 Budget

How it works: Divide your income into three categories: 50% for needs (rent, groceries), 30% for wants (travel, entertainment), and 20% for savings or debt repayment.

Who it’s for: Beginners looking for a straightforward budgeting method that provides clear spending guidelines.

The Envelope System

How it works: Allocate specific amounts of cash into labeled envelopes for different spending categories (groceries, dining out). Once an envelope is empty, no more spending in that category.

Who it’s for: Individuals who struggle with overspending and prefer a visual, cash-based approach to budgeting.

Pay Yourself First

How it works: Directly allocate 20% of your income to savings first, then use the remaining 80% for all other expenses.

Who it’s for: Those prone to lifestyle inflation who need a disciplined approach to ensure consistent savings.

Zero-Based Budgeting

How it works: Assign every dollar of income a specific purpose, ensuring that income minus expenses equals zero.

Who it’s for: People who want precise control over their spending and need to account for every dollar they earn.

The PERK Method

How it works: Evaluate each expense by categorizing it as Postpone, Eliminate, Reduce, or Keep, periodically reviewing and adjusting spending habits accordingly.

Who it’s for: Individuals who frequently start but struggle to maintain traditional budgeting systems, needing regular reassessment of financial habits.

The Kakeibo Method

How it works: A traditional Japanese approach focusing on mindfulness and categorizing expenses into Survival, Extra, Optional, and Culture.

Who it’s for: Those who prefer a holistic and reflective approach to budgeting, prioritizing spending that aligns with personal values and happiness.

Values-Based Budgeting

How it works: Prioritize spending based on personal values and adjust allocations as priorities shift over time.

Who it’s for: People seeking flexibility in their budgeting approach to accommodate changing life goals and financial priorities.

Each method offers a unique perspective on managing finances, catering to different preferences and needs in budgeting practices.