Top Personal Budget Plans

best personal budget plans

Top Personal Budget Plans

Monthly budgeting can be a tedious task, but acknowledging that there’s no one perfect way of doing it leaves room for comfort. There are countless ways to control personal finances, depending on income bracket, amount of debt you’re in, desire for control over your finances, or simply personal preference.

If you’re not sure where to start to make your budgeting life easier, or you just want to see what other options are out there, here are the four most popular personal budget plans used by people today to help you on your way.

Balanced Money Form/50-20-30

What is the 50-20-30 Plan?

  • Derived from Senator Elizabeth Warren’s book, All Your Worth
  • Sometimes referred to as the “Rules of Thumb”
  • 50 percent of after-tax income should go towards needs, or essential items like insurance, health care, rent/mortgage, car payments, utilities, groceries, etc.
  • 20 percent of after-tax income should be allocated to savings and investments, to include savings accounts, emergency fund (at least three months on hand), IRA, or debt repayment (excess payments made after the minimum payment of the needs category is fulfilled).
  • 30 percent of after-tax income should go towards wants, things such as gym memberships, vacations, date nights, season tickets to your favorite sports team, etc.

Good & Bad?

There are a few good parts to this plan. It’s relatively straight forward and simple. It allows you to track where each month’s earnings are going. And all you have to do is categorize your spending into only one of three options, wants, savings, or needs.

One point of contention with this plan is that 20% savings, while an admirable goal, is unlikely for the average American. In 2019, the average adult saved less than 10% of their annual income (although this does vary by age). Some people also find issue with categorizing needs from wants and facing the hard truth that some wants may have to be cut out.

Who Is It Best For?

The 50-20-30 is best for those that are new to self-money management or have a problem with over-spending in the wants side of things. It can provide a great framework for first-time budgeters, but also has longevity if one desires to maintain it.

It is also a great strategy for someone who wants to retire early (the younger you are, the easier that goal is to achieve with this plan). However, if your goal is to get out of debt, this is not the recommended starting point, as it is not as customizable a budget as needed for a Debt Snowball or other debt reduction approach.

See here for a helpful 50-20-30 Calculator

Envelope/Cash-Only

What Is It?

  • Cash-based system
  • Determine your personalized “envelope” categories based on spending habits (use apps or programs to track where your money goes and prioritize; here’s a good article on the top, most-recent expense trackers).
  • Obviously some things cannot be paid for in cash (like mortgage, utilities, etc.); using online banking or a check in these instances is expected but should still remain within your after-tax income window when combined with envelope categories.

Good & Bad?

Categories are near-endless and entirely customizable – you can create an envelope for anything that’s important to you. It is simple, well-organized, and regimented.

It will require you to get rid of all plastic (no debit cards for everyday transactions or credit cards as a “safety net”), which is a very scary thing for some to adjust to. This also may seem scary for those who don’t like to keep cash-on-hand or fear losing their money-filled envelopes.

Who Is It Best For?

This method works great for those who are trying to get rid of bad spending habits, knock down their debt, completely reorganize their finances, or want tight control over their money.

Zero-Based/Every Dollar

What Is It?

  • Known for giving every dollar a job
  • Allocate every single penny of your after-tax income to a specific purpose/category so you have “zero” leftover.

Good & Bad?

The most positive aspect of this system is that you have detailed, focused, specified spending. It lends toward efficiency and accounts for financial needs of right now rather than what may/may not have worked for you in the past.

The biggest complaint about this system is the amount of time it takes to set this up and maintain it (although there are things to help with that, like EveryDollar or YNAB). It also does not really allow for extraneous or spontaneous spending.

Who Is It Best For?

If you want absolute, planned-out control of your finances, this budget method is best for you. If you lean towards a more flexible system, this is one to probably avoid.

No-Budget

What Is It?

  • Only have to manage two main things: how much money is in your bank account and how much money you absolutely have to spend each month on necessities (like rent/mortgage, car payment, insurance, etc.)
  • Set-up auto pay to take care of everything automatically (suggested 10% sent to savings from each paycheck and the exact amount for your fixed expenses taken out on a monthly basis)
  • The rest is up to you to save or spend as you see fit, but when it’s gone, that’s it.

Good & Bad?

This is a very relaxed approach to budgeting that requires very little work, very little time, and does not require you to allocate for every penny.

Unfortunately, this method can allow you to forget about important future planning (like retirement, savings, future down-payments, etc). If you don’t take the time in the beginning to do the set-up, decide to never revisit your income, or fail to recognize spending habits, this can potentially set you onto unstable financial ground.

Who Is It Best For?

This is the best plan for those who hate having a plan. Typically, this tends to work better for those with a higher, more cushioned income or those who make way more than their regular expenses. It would not be recommended for those who have a tendency to overspend, like to plan, or are trying to pay down debt.

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About the author

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Samantha Cain has 10 years of experience as a freelance writer and content creator, specializing in a variety of topics such as higher education, personal finance, event planning, DIY projects, and military life. She holds a BA in English, is working towards an MS in Higher Education, and has been a military spouse for eight years. Having lived on a number of overseas military bases, she brings a unique perspective to her writing and strives to provide quality and beneficial information to the military community.