# What are the different methods for budgeting?

I've always used the envelope method to budget. I know Mint uses a different method, but I'm not sure if it has a name or not. It could simply be a derivative of the envelope method. Wells Fargo's built in budgeting tool seems to do the envelope method in reverse, where you spend until you reach the upper limit. Again, does this have a name?

What are the most common budget methods? What are their pros and cons?

• "Envelope method" looks like it is more a method for tracking a budget than a method for constructing the budget in the first place. May 2 '19 at 21:13
• The best way to successfully budget your money is to keep it in your pants (your wallet). Jun 9 '20 at 13:09
• Jun 9 '20 at 14:19

There are four common types of budgeting methods :

1. Incremental budgeting

Basically you take previous month's numbers (assuming your track your spending to the penny) and you add or subtract a percentage to obtain the next month's budget.

1. Proportional Budgets

For example, in the 80/20 budget, you spend 80% of your income, and save 20%. In the 50/30/20 budget, you spend 50% on necessary items (needs), 30% on discretionary expenses (wants), and put 20% toward debt and savings.

1. Value proposition budgeting

Paying yourself first puts the focus on your savings. That’s because you put money away at the beginning of the month, before you have a chance to spend it on anything.

1. Zero-Sum Budget

This is exactly what it sounds like. At the end of the month, your budget should equal zero. That means that if you have \$300 left at the end of the month, you need to give that \$300 a job. Every dollar needs to be accounted for.

Personally I suggest you mix Proportional Budget, The Envelope Budget and Zero-Sum Budget. This will gives you a pretty good general idea about where your is going (Proportional Budget), also you organize the portions into sections so your money is well spent (The Envelope Budget) and you know exactly where every cent will go (Zero-Sum Budget).

• So you have answered the first half of the question, which asks which budgeting methods are common. (I can't judge the validity of that part of the answer.) However, you don't seem to touch much at all on the second half of the question, which asks for their respective benefits and drawbacks. Why should a person choose one of these over the others, or indeed a particular mix of them?
– user
Sep 13 '19 at 20:18
• It's also worth keeping in mind that "debt" is really just another word for "money you've already spent". So if you're on a 50/30/20 budget (as in your example), and you're putting those 20% toward paying off debt, you really aren't saving anything. (You're hopefully reducing your future expenses, but you're not saving for a rainy day, or indeed for a sunny day either.)
– user
Sep 13 '19 at 20:21
• My experience is also that many needs are rather fixed costs; the mortgage cost doesn't vary much (and certainly rent doesn't vary much at all), transportation costs don't vary much, utilities (at least per 12 months, to account for seasonal variations) don't vary that much, and so on. For such expenses, it's probably better to allocate a fixed amount than a fixed percentage.
– user
Sep 13 '19 at 20:21
• I don't see how Value proposition budgeting as you describe it is a budgeting method. Oct 13 '19 at 19:05

I write down each payment method and create a list in order by due date under each payment method. Then as each date arrives I pay the bill that's due and write it down with the following months list

• Your method is similar to (except not by category) what I do -- Spreadsheets are your friend!!! -- and integrate it with a checkbook register. It's worked great for six years. Jun 4 '19 at 21:15
• This sounds really similar to what I describe in my answer to Strategies to earmark money for large expenses. However, I don't see it being a method for budgeting, but rather just a way of keeping track of your individual bills. It does nothing, for example, for the things you pay for with cash (unless you write yourself a bill for it or something like that).
– user
Sep 13 '19 at 20:11
• @aCVn this is a great budgeting method (at least the way I do it, with a check register spreadsheet that I forecast a month into the future): I know when my paychecks arrive and how much they are, plus when my bills arrive and about how much they'll be. (CC payments are not bills in my scheme. They are a method of paying bills.) Variable items like groceries get a fixed amount every month that I never exceed; thus I treat them as fixed costs. Oct 13 '19 at 19:04