A budget is not a punishment. It is a plan that tells your money where to go. There is more than one way to make one, and the best method is the one you will actually use.
This article is the reading companion to the free Mondosol lesson Money Matters: Budgeting Methods, part of the Money course. Read it, watch the videos, or press play and listen first, then practise in the lesson.
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In this article
What a budget is
A budget compares the money coming in (income) with the money going out (spending and saving). When you know both numbers, you can make choices on purpose instead of wondering where the money went.
Every method below does the same job in a different way.
The 50/30/20 rule
This popular rule of thumb splits your income after tax into three parts.
| Share | Used for | Examples |
|---|---|---|
| 50 percent | Needs | Rent, food, transport, bills |
| 30 percent | Wants | Hobbies, eating out, subscriptions |
| 20 percent | Savings and debt | Emergency fund, goals, paying off debt |
The shares are a starting point, not a law. If your rent is high, your needs may take more, and that is fine as long as you can see it clearly. If you are unsure which is which, read Needs vs. Wants.
The envelope method
Write a spending category on each envelope, for example food, transport and fun. Put the planned amount of cash in each one. When an envelope is empty, that category is finished for the period.
Many people now do the same with separate pots in a banking app. The idea is the same: a limit that you can see.
Zero-based budgeting
In a zero-based budget, every euro gets a job, so that income minus planned spending and saving equals zero. “Zero” does not mean you have nothing left. It means that nothing is unplanned, because savings count as a job too.
This method takes a little more time each month, but it shows you everything.
How to choose a method
| Method | Good for | Watch out for |
|---|---|---|
| 50/30/20 | Beginners who want something simple | Shares may not fit your situation |
| Envelopes | People who overspend in one category | Needs a routine to refill and check |
| Zero-based | People who like detail and control | Takes more time |
Start with the simplest one, try it for one month, then adjust. Tools can help too, but a notebook works just as well.
Watch and learn
Two videos show these methods in action.
Video: “Types of budgeting methods: 50/30/20, zero-based and envelope” by Whitney, on YouTube.
Video: “How to save money using the 50/30/20 budget” by Whyze, on YouTube.
Take it further
Reading is a good start. These options help you go from knowing to doing.
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Frequently asked questions
What is the easiest budgeting method for beginners?
Many beginners start with 50/30/20 because it only needs three groups. Try it for a month and adjust.
Do I need an app to budget?
No. A notebook, a spreadsheet or envelopes all work. Choose what you will check regularly.
What if my needs are more than 50 percent?
Then change the shares. The aim is to see where your money goes and to save something, even if it is small.
How often should I check my budget?
A quick look once a week and a longer review once a month is enough for most people.
Is a budget the same as saving?
No. A budget is the plan. Saving is one part of the plan.
Keep learning
- Course: Money
- Lesson (practise it): Money Matters: Budgeting Methods
- Read next: Track Your Spending for a Week and How to Set a Savings Goal
- Related: Your First Pay Cheque
Educational, not financial advice. The example numbers are invented, and this post contains no affiliate links. Mondosol is not a licensed financial adviser.
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