Skip to main content

With the rising cost of living, effective budgeting is essential for financial stability. In this article, we will explore the steps to creating a budget and various budgeting methods to help you manage your finances.

Before you Begin Budgeting:

  1. Determine your income: The first step in creating a budget is to determine how much money you have coming in each month. This includes your salary, any side income, and any other sources of money you may have. Just grab some paper and pen and list down all of your income.
  2. Identify your expenses: Next, make a list of all your fixed and variable expenses. Fixed expenses are those that stay the same each month, such as rent or mortgage payments, while variable expenses change month to month, such as groceries or entertainment.
  3. Set financial goals: It’s important to have a clear idea of what you want to achieve with your budget. Do you want to save for a down payment on a house, pay off debt, or build up your emergency fund? Setting financial goals will help you prioritize your spending and make the most of your budget.
  4. Track your spending: To get a better understanding of where your money is going, track your spending each month. This will help you see where you may be able to cut back or make adjustments to your budget. To make things simple, you can just track it using an excel spreadsheet and categorize your spending, such as shopping, groceries, bills, etc.
  5. Make a plan: Once you have all this information, you can start putting together a budget that works for you. This may involve cutting back on certain expenses, finding ways to increase your income, or a combination of both. The key is to find a balance that allows you to meet your financial goals while still enjoying your life.

Types of Budgeting Methods

It’s important to find a budgeting method that works for you and your financial situation. Experimenting with different methods may help you find the one that works best for you.

1. 50/30/20 Budgeting Method

This method involves allocating 50% of your income to essentials, such as housing and bills, 30% to wants, and 20% to savings and debt repayment.

50/30/20 Budgeting Methods Example

2. Envelope Budgeting Method

With this method, you set aside cash for each of your budget categories and physically place the money in envelopes. When the cash in an envelope is gone, you know you have reached your budget limit for that category. If you feel like it is tedious to use a physical envelope, you can use the Goodbudget app which is available on both Android and iOS. It allows you to divide your money into different envelopes or categories.

3. Zero-Sum Budgeting Method

With a zero-sum budget, you allocate every dollar of your income to a specific category or purpose. Any leftover money at the end of the month is saved or used to pay off debt.

4. Value-Based Budgeting Method

This method involves prioritizing your spending based on your values and priorities. You allocate more money to the things that are most important to you and less to the things that are less important.

5. Flexible Budgeting Method

A flexible budget allows for some flexibility and adjusts to changes in your income and expenses. This can be helpful if you have a variable income or unexpected expenses.


Please keep in mind that you will more than likely have some months where you find that you were not able to stick to your budget, but that is normal because often you will have unexpected expenses so please don’t beat yourself over it. Happy saving!

Robyn Stha

Robyn is a software engineer with over 3 years of experience as a developer. Engineer by day, and blogger by night, she enjoys the little things in life like her morning coffee, trying out new recipes, and reading.

Leave a Reply