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Choose the Right Budget Type for Your Finances

Choose the Right Budget Type for Your Finances

Jenius Bank Team2/28/2025
Woman holding a credit card next to different budget pie charts.
Choosing the right budget could help you make smarter financial choices.Managing your finances is tough, and if you’re struggling to stay on track, you’re not alone. According to our recent survey, over half of respondents report feeling stressed or anxious because of their finances.While there’s no way to completely alleviate that stress, there are steps you could take to reduce the anxiety you feel around your finances. Creating a budget is a great first step. That said, there are several types of budgets to choose from. Finding the right one for your finances may require some research and maybe even some experimenting.Let’s look at some of the most common budget types to help you choose the right option for your financial situation.

Key Takeaways

  • There are many types of budgets that you could use to take control of your finances and build your savings.
  • Tracking your spending before you establish a budget could help account for all of your money, potentially making budget implementation easier.
  • Reviewing your budget regularly could help you evaluate progress and identify the features of the budget that are working well and the ones that aren’t.

Tracking Your Spending Is a Must

Before you start looking into the different types of budgets, help set yourself up for success by laying the groundwork. This means taking the time to track your spending. When you track your spending each month, you’re able to see exactly where your money is going and which categories you’re spending the most on. This helps you identify your necessities, your nice-to-haves, and your saving opportunities while also giving insight into the expenses that you may be able to reduce or eliminate. The better you understand where your money is going compared to how much you’re bringing in each month, the easier it may be to set financial goals and to create a budget in the first place.

Benefits of Building a Budget

Though tracking your spending and creating a budget may feel like extra work, doing so could have a few key benefits.
  • Increasing savings: When you know where your money is going, you may find ways to cut back and boost the amount you contribute to your savings each month.
  • Making intentional spending choices: A budget could encourage you to make intentional spending choices rather than purchasing items on impulse.
  • Achieving your financial goals: With a budget, you’re able to better evaluate your spending and ensure you’re allocating funds toward your financial goals.
  • Tackling debt: Debt could be a drain on your finances. With a budget, you could prioritize paying down debt.
These are just a few of the benefits you could experience by building a budget. Overall, budgeting is about helping you feel more in control of your money.

Types of Budgets to Consider

Everyone’s financial situation is unique and that means the budget that works for your best friend may not be the best one for your needs, your goals, and your finances. Luckily, there are many different types of budgets to choose from. Here are a few of the most common budgeting methods.

Zero-Based Budgets

Zero-based budgets are commonly used by businesses to ensure that they’re meeting their goals and projections, and you could implement a similar budget for your finances. This budgeting method is designed to help maximize every dollar you bring in by giving it a purpose, which may make it easier to help reach your financial goals as you go. But it’s an incredibly disciplined approach because you account for every dollar every month.This type of budget is often best for people with stable incomes since it’s so rigid. Having consistency in each budget category may make it easier to track.

Pay-Yourself-First Budgets

Pay-yourself-first budgets prioritize building your savings and paying off debt. Under this budgeting method, you look at your essential expenses and set funds aside for those costs. Then, you divide the rest of your monthly earnings toward your other goals.How you divide those funds up is up to you. If you have debts, you may choose to contribute the bulk of your extra income toward additional debt payments so you could pay them off faster. If you’re saving for a specific purchase, you may allocate more funds toward that goal before contributing to others.If you choose this budgeting method, you may want to open a savings account for each goal you’re working toward and set up automatic transfers to help you save. Having dedicated accounts for each goal may help you track your progress more easily and make it less tempting to dip into those savings for other purchases.

Value-Based Budgeting

Value-based budgets work to align your savings and spending goals with your personal and financial values. The purpose of these budgets is to help change your relationship with money so you spend more intentionally with an aim of supporting the goals that are most important to you.To implement this budget, consider what your financial values are. Once you understand those values, prioritize your savings goals to align with those values. Keep in mind that your goals could be as small or as lofty as you want—it’s all about focusing on what’s important to you.

50/30/20 Budgets

50/30/20 budgets are an allocation approach toward managing your money that breaks expenses into three categories: your needs, your wants, and your savings.
  • 50% of your income goes toward your needs like rent, mortgage payments, food costs, insurance, and other necessities.
  • 30% of your income goes toward items you want like gym memberships, entertainment, and the occasional splurge .
  • 20% of your income goes toward your savings like your vacation fund, retirement fund, or other savings goals.
These budgets are simple and may work well for those who are just starting to focus on managing their finances. That said, if you have high levels of debt or want to save more aggressively, you may want to use a different budgeting method.

60/30/10 Budgets

60/30/10 budgets are similar to the 50/30/20 method but give you a bit more flexibility when trying to pay for items you need and want. The system breaks your monthly income down into these three buckets:
  • 60% of your income goes toward your needs like housing, groceries, insurance premiums, and other similar costs.
  • 30% of your income goes toward your wants or nice-to-have purchases like going out to eat, streaming services, and gym memberships.
  • 10% of your income goes toward your savings goals.
By allocating more of your monthly income to your needs and wants, you reduce the amount you save each month but may not have to worry about pinching pennies just to get by. As with the 50/30/20 budget, the 60/30/10 method may not be ideal if you’re carrying balances on credit cards or want to pay down existing debt more aggressively.

No-Budget Budget

The no-budget budget method is a more flexible money management approach that may work well for people who are confident in their ability to stay on top of their finances without using strict spending categories. This method looks at your total pay for the month—factoring all of the money you’re earning from your job, your side hustle, your investments, and other sources—and the total cost of your necessities or “must-pay” items. The money you have left after paying for your necessities is yours to save or spend as you see fit.The flexibility is nice since your budget and spending may change from month to month, but without clear goals or limits in place, you may end up spending more than you should.

General Budgeting Tips

While all of these budgeting methods may help you better manage your money, here are a few additional tips to help increase your chances of success, regardless of the method you choose.
  • Review your budget often: Your finances change over time and that means you should review your budget every few months. This gives you a chance to adjust your goals, account for income changes, and other shifts in your situation.
  • Give your budget time: When you’re first starting out, it may take some time to get used to your new budgeting method. Give it a few months and see what you like and what you’re struggling with. You could always switch to a different method if needed.
  • Budget for unexpected and miscellaneous expenses: Unexpected expenses could pop up at any time. That’s why it’s always a good idea to set a little money aside each month. You may want to open a rainy day fund or emergency fund to hold those savings.
  • Be forgiving of yourself: When you’re just starting to follow a budget, it’s normal to make mistakes. Rather than letting those mistakes derail your progress, be forgiving and give yourself the grace you deserve.

Final Thoughts

Building a budget is a great way to manage your finances and help you stay on track toward your financial goals. And choosing the right type of budget for your situation could make reaching those goals even easier. Be sure to celebrate your progress and forgive yourself if you don’t stick to your budget 100% of the time. There’s always next month to right the ship!
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