What Are the Types of Budgets? 4 Types and 1 Anti-Budget

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It may be overwhelming to think about putting together a budget. But when you start browsing the Internet and realize there is more than one type of budget, your head may just explode. I mean, how did something so simple become so complicated?

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Now you’ve got questions: What is the best type of budget? How many types of budgets are there? Are these digital or cash-only budgets?   

I hear ya! To help simplify the matter, let’s look at 4 types of budgets and one anti-budget to help you get started with your own money plan.

Let’s get into it!

Prefer to listen to the post? Listen to the latest episode of the Savvy Brown Girl podcast below:

Zero-based budget

This is the type of budget you’ve heard from people like Dave Ramsey. He didn’t make it up; he just popularized it. A zero-based budget is one where every dollar has a job. What goes out equals what comes in. For example, if your paycheck is $3100, in a zero-based budget, you’ve assigned a job to each dollar with nothing left without a purpose.

This is a good place for beginning budgeters to start. It can be a little intimidating if your budget doesn’t balance.

50/30/20 budget and its variations

While a valid type of budget, it’s not one of my faves. In the 50/30/20 budget, you allocate 50% of your income to needs, 30% to wants, and 20% to savings and paying off debt. I find these to be arbitrary numbers that just don’t work for everyone. Your cost of living, income, debt and other factors may make this budget ratio simply unattainable. And if you can’t do it, you’ll feel like a failure. Who wants to feel like that? You are definitely free to adjust these percentages, but remember they are only suggestions. Personal finance is just that – personal. 

This is also a good budget for beginners because you don’t have to guess how much should go in each category. Simply follow the percentages outlined and adjust your budget from there.

Values-based budget

This is my favorite type of budget because it emphasizes what you value. You will allocate money to the things you value, like, maybe, lattes, and work the numbers out for the rest of your budget to cover needs, wants, savings, and debt payoff. Using this method, you won’t be looking for a magical percentage of your budget for each category. If you value eating out, then you have to find a way to work that into your budget. Same with trips to the local coffee shop or buying books.

Is there a point where you may have to do without some things for a while because you need the budget to balance, and starvation is not a good look? Sure. But you can also adjust the frequency of things as well. Let’s say you love buying books. Well, instead of buying $100 of books each month, maybe you trim it to $50 and look for used books first. That way, you still get your books, but you’re also saving money at the same time. I think that’s a win all-around.

Envelope system

While not technically a type of budget, it is more of a means to manage your money and combine it with one of the types of budgets I just mentioned. You can do this digitally with an app like YNAB (You Need a Budget) or Qube or with physical cash money and envelopes like I do. To see how this works with binders and envelopes, check out my video on the Savy Brown Girl YouTube channel, “How to Start a Cash Envelope System.” The link will be in the show notes.

Basically, you take the categories you’ve set up in your budget and assign them to envelopes (digital or physical). When you get paid, you’ll go to the bank, withdraw cash, and stuff the envelopes with the correct amount for that pay period. Again, there’s no normal amount for how much you should put in each envelope. That’s determined by your family’s needs and how you set it up in your budget.

And as I said, this can be done virtually as well if you prefer. However, I have found that the physical act of handling money makes you more aware and improves your spending habits. So before you go completely digital, I suggest giving cash a go for at least 3 months.

Now, for the one type that’s not actually a budget.

The anti-budget 

This is the type of budget where you don’t actually track income and expenses. Instead, you set a savings goal and use the rest of your money as you wish to live your life. Whether that savings goal is 50% of your income, 10%, or some other percentage, you allocate the rest of your money for living expenses.

This type of budget works best for those who have been budgeting for a while and have a good handle on their money, are debt-free, and have minimal expenses. That doesn’t mean you can’t try it, but it could be harder than necessary if you don’t have the foundation for creating and managing your money with a budget.

As you can see, there are a few directions you can take when it comes to choosing a budget system, and you may have to try all of them before you figure out what works for you. No one ever creates the perfect budget and there are no perfect months. Rather than waiting for the right time to start, just start now. Today. As in right after you finish this episode. Take out a sheet of paper and list your income and expenses, and get to work. You’ll be glad you did.
If you want to learn more about budgeting, check out my book, “Budgeting for Women,” which is also available on Amazon. I go over the ins and outs of budgeting in a bit more detail. You can get it as a physical book or an ebook.

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I am a navy veteran and military spouse. I write about budgeting, savings, and debt.

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