3 Simple Budgeting Systems and the Best Tools for Each

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Setting up a budget is simple, but sticking with it is much harder.

Finding the right budgeting system for your household and personality is the best way to stay on track.

With so many budgeting options, it’s difficult to know where to start.

The budget that works best for your friend might be terrible for you and vice versa.

Learn how different budgeting systems works, their pros and cons and how to determine the right one for you.

3 Popular Budgeting Systems

The most popular budgeting systems are the zero-based budget, the 50/30/20 budget, and the envelope budgeting system. Each one is set up a little differently so give them all a fair try to find out which one works best for you.

1. The Zero-Based Budget

The zero-based budget system means giving every dollar a job. First, take all of your income for the month and assign it in buckets like saving, groceries, car insurance, vacation, and more. Do this until there are zero dollars left.

This system works well because each dollar has a purpose. If you have money left over at the end of the month, it means you didn’t give it a job. On the other hand, if you spent too much, you won’t be able to put money in other buckets.

Best if you:

  • Like knowing where all of your money is going that month
  • Plan out your monthly spending
  • Need help with overspending

Not for you if:

  • Want a more hands-off approach to budgeting
  • Can’t stay on top of spending every month
  • Aren’t good at adjusting your budget throughout the month

The Best Tools for the Job

The right tools can help you make a zero-based budget work for you. They can help you plan out your monthly buckets and figure out the best way to handle unexpected expenses. Budgeting systems can also automate the data, so you don’t have to enter each transaction separately. This makes it easier to stay on top of your spending.


You Need a Budget or YNAB, is a budgeting software that helps you prioritize how to spend your paycheck. Use the software to make a plan for your regular monthly spending and irregular expenses.

It also allows you to move funds around if you overspend in one area. This can be helpful if you have to buy Christmas gifts one month or have to pay for car registration. Many budgeting systems are too rigid and cause you to feel guilty when you overspend in one category.

YNAB offers a solution that lets you shift funds around between categories to cover overspending. The software also works on the idea of getting 30 days ahead on your spending so you’re not waiting for this month’s paycheck to pay the rent.


EveryDollar is the budgeting app created by Dave Ramsey. The software tries to give every dollar a job, like the zero-based budget system. There is an app and a desktop component so you can review and update your budget anywhere.

EveryDollar has both a free and a paid version. The free version lets you create a budget but requires you to enter and track everything by hand. With the paid version, you can connect EveryDollar to your bank accounts and sync your transactions.

Within the app, there are eight basic categories, but you also can create your own. Because this app was created based on Dave Ramsey’s teachings, you can also use it as a guide to help you move through his baby steps.

2. The 50/30/20 Budget

The 50/30/20 budget is another system that can help you get your money in check. It’s easy to remember and helps you divide your after-tax monthly income into three big buckets: 50 percent for needs, 30 percent for wants, and 20 percent for savings and debt.

It’s simple and easy to implement and gives you room in your budget for fun things, savings, and paying down debt. As long as your spending follows the 50/30/20 rule, you can track it in detail or keep it more general.

Best if you:

  • You want an easy way to divide your paycheck
  • Still have room for fun while paying down debt and saving
  • Don’t want to track every dollar you spend

Not for you if:

  • Have a lot of debt
  • You want to save more aggressively

The Best Tools for the Job

Even though the 50/30/20 budget is easier to follow, you still need good software to make tracking easier. This budgeting system doesn’t need as much tracking as the zero-based budget, but the more you track your money, the less chance of overspending.


Trim isn’t a budgeting app, but it will help you keep spending in check. It helps you negotiate savings on services you’re already using such as your cable, internet or cell phone bill.

It’s free to sign up and see where you can save money without canceling services or switching providers. It’s also a huge time-saver. When you call the cable company, it can take forever to talk with a representative and negotiate a lower rate.

Trim has the entire process automated and uses certain verbiage to get companies to lower your bill. While it’s free to use, you have to pay 33% of your annual savings. In addition, you must be comfortable linking your financial accounts.

Personal Capital

Personal Capital is an online budgeting tool that pulls banking and credit card information from your accounts. You can use this information to build a budget and track your spending. Best of all, it’s free to use.

This tool requires linking your financial accounts, including your bank, credit cards, and retirement accounts. Personal Capital has broad categories to help you create a personalized budget.

Personal Capital attempts to categorize expenses on its own, but it’s not 100% accurate. You’ll still have to log on and double-check the transaction.


Excel can be a great way to stay on top of your budget. You can build your own simple spreadsheet to use with the 50/30/20 budgeting system or pick a budget template that fits your needs.

You may already have Excel installed on your computer. If you do, then you don’t have to pay anything extra. You may also be familiar with it already if it’s something you use at work. Remember, the best budget is the one that’s easiest for you to use.

When using Excel, you’ll have to enter transactions manually. This means staying on top of your finances and not letting too many days go by before logging your spending. An Excel budget can help you be more mindful of your spending, but only if you update your spreadsheet consistently.

3. Envelope Budgeting System

The envelope budgeting system is another popular way to track your spending. Unlike other budgeting systems, you have to use cash to stay accountable for your spending. Spending cash forces you to experience the pain of separating with your money that you don’t get with a credit card.

When you use a credit or debit card, it’s easy to swipe your card and forget about what you spent. With the envelope budgeting system, you create envelopes for each spending category and put your cash allowance for the month inside each envelope.

You can only spend the cash within that envelope to pay for related purchases. This means creating separate envelopes for groceries, entertainment, clothes, and more. When the money’s gone, it’s gone. You can still use direct debit for bills such as utilities or your mortgage.

Best if you:

  • Overspend in certain categories or lose track of spending altogether
  • Don’t mind carrying cash around
  • Don’t enjoy keeping track of every purchase

Not for you if:

  • Don’t want to carry big quantities of cash and go to the ATM every pay period
  • Burn through cash if you have it available
  • Want the convenience of using plastic

The Best Tools for the Job

Using a cash envelope system can be hard, especially if you’re literally carrying cash with you everywhere. There are two ways you can make this system work for you.


If you want the convenience of using plastic but like the accountability of the envelope system, Mvelopes is a solution that marries the two. The program lets you use digital envelopes to track your expenses within each budget category.

You’ll need to connect your accounts and create a budget before you can use Mvelopes. It gives you a complete picture of your bank accounts and extensive reports you can use to review your spending patterns.

While the program makes using digital envelopes easier, it’s not the same as using physical bills. You still use plastic for your transactions and need to check with the program to stay on top of your spending in each envelope.

Cash Envelopes

If you want to use actual envelopes for your cash, you can buy a box from the dollar store or make your own. All you need is a stack of envelopes and a pen. You can use different colors to make it easy to find the right envelope.

If you have construction paper, you can make your own simple envelopes in different colors. You can also buy a ready-to-use kit that has everything you need to use the envelope budgeting system.

3 Tips to Make Any Budgeting System Successful

Setting up a budgeting system

No matter which budgeting system you use, there are few things that will guarantee your success. Take charge of your money, stay on top of your spending, and follow the principles of the budgeting method of your choosing.

Be Consistent

For a budget to work, you need to check in with your spending. One of the easiest ways to do that is to have a money date once a week. If you have a significant other, make sure you involve them so you can be on the same page.

If you want to be successful and stay on track with your budget, you need to be consistent. For irregular or unplanned expenses, figure out how to cover them while still sticking to your budgeting plan.

Leave Some Wiggle Room

When you create a budget, you may want to cut back in every category and get your spending under control. However, this can backfire since you’ll feel deprived and end up overspending.

Instead, choose one or two categories where you want to cut back and lower your spending. For example, if you spend $400 a month on groceries and want to lower it, plan to spend 5 to 10% less the following month.

Keep cutting back until you are comfortable with your spending in that category. Then, move on to the next. By picking one category to focus on, you won’t get overwhelmed trying to cut back on everything all at once. This way you set yourself up to succeed.

Plan for Fun

When you first create your budget, you may be tempted to leave out fun categories like eating out or entertainment. While this can save you money in the short run, it will lead to burnout and may cause you to abandon your budget completely.

Instead, build some fun into your monthly spending. Include a line item for dining out or give yourself a personal allowance. This doesn’t have to be a large amount, but enough for you to have fun and not feel guilty.

Combine Your Favorite Budgeting Systems

The best budgeting system is the one that best fits your needs. You don’t have to use one budget type to get control of your money. Take the parts you like the best from each budgeting system and build your own way of tracking your spending and saving.

For example, you can combine a zero-based budget and the cash envelope system. Create a zero-based budget for each month, but pick a few categories where you have trouble restraining yourself and put money in a cash envelope to help you limit your spending.

There is no one-size-fits-all with budgeting. The best budget is the one that works for you and your family.

Veneta Lusk

Veneta Lusk is a freelance personal finance writer who loves empowering people to get smart about their finances and health so they can live their dreams. After becoming debt free, she and her husband created a flexible lifestyle so they can travel more, focus on fun projects, and spend time with their children. When she’s not writing or hanging out with her family, she enjoys reading, baking, and planning the next big adventure.

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