Everyone is different and different types of budgeting are going to work for different people. Oftentimes we don't know what works for us until we try different things and sometimes things we thought may not be right for us are exactly what we need. Be open to experimenting with your budget and see how it works out for you.
That said, the different types of budgets include; traditional, zero-based, envelope, 50/30/20, pay yourself first, rolling, and value based budgeting. More advanced methods of budgeting may include that of performance or capital budgets.
Again it is important to consider what may work for you and your own personal preferences along with things like financial goals and your current or future circumstances.
Traditional
This is by far the most popular form of budgeting as it is a very straightforward approach. Firstly, with traditional budgeting you are to estimate your total income, then you allocate your income to specific expenses as needed.
After that, you are then tracking your everyday spending and comparing that to your allocated amounts and making adjustments as needed. This is a very basic and fool proof plan to budgeting and may be a great place to start for beginners.
Zero-based
With this type of budgeting you simply allocate what you make from your income to each spending category or to your specific savings goals. Thus, with zero based budgeting your income minus your expenses and your savings will equal out to a perfect zero.
With zero based budgeting you will need to be specific about all your earnings and make sure that everything is accounted for and that you start each month on a fresh page having put your money in categories leaving 0 left over.
Envelope
Envelope budgeting is an older cash based form of budgeting where you allocate a specific amount of cash to different envelopes that represent expense categories. You may decide to have an envelope for all separate categories of spending and only spend what is in each envelope.
Once your cash is gone, or you may find that you don't have much cash leftover you may want to reconsider purchases and spend more wisely. This again, can be a great beginner budgeting plan that allows you to see your allocated amount more clearly and feel it in your hands.
50/30/20
The 50/30/20 budgeting guideline is a very popular form of budgeting where you allocate 50% of your budget for your basic needs such as housing, food, utilities and other living expenses, 30% of your income to be spent as you deem fit and 20% of your earnings to put but away in savings. This can be a great intermediate form of budgeting that allows you to save more money for future investments or to simply create more savings for when you may need them the most.
Savings are incredibly important although there are many that do not plan to save. Having savings to dip into can be extremely important for a time of need or emergency. At the end of the day, having savings is a safety cushion if things go wrong or it is accumulated wealth that can be spent on a larger more meaningful purchase.
Pay yourself first
Pay yourself first is exactly what it seems, you pay yourself first. With this type of budgeting you prioritize yourself and your savings by setting aside a predetermined amount of money as soon as you receive it. With this form of budgeting you treat your savings as a more prolific expense then adjust your spending based on what is left over.
Rolling
With rolling budgeting, you are creating a short budgeting period such as a month and then updating your budget regularly as the month continues. What this means is you are allowing more flexibility later on based on your ever changing life circumstances and situation.
Value based budgeting
Value based budgeting helps to regulate your spending by your own personal values and priorities. You are in charge of deciding what is most important to you and allocating larger sums to the categories you desire given your own personal goals.
You may then reduce spending in the areas that you personally do not value as much as the others. This could look like saving a lot of money and living more frugally or saving less and spending more on the things you care about and find enriching to your life.
Digital budgeting apps
The hottest trend and most likely a huge new contributing factor to you budgeting and staying within your financial budgeting goals is by utilizing budgeting apps or software. Apps and software can simplify the process of tracking expenses, creating budgets, and analyzing your financial situation.
These apps often sync with your bank accounts and credit cards, making it easier than ever to monitor your spending and savings goals. Our top app recommendations include: Mint, YNAB and various banking apps.
Advanced budgeting methods
For those looking for more complex forms of budgeting we may suggest the following; Capital or Performance budgeting. These two types of budgets rely on investments and capital to meet very specific goals. Each type of budgeting can be found being used in business settings to help businesses acquire more assets.
Capital budgeting
Capital budgeting is a budgeting type primarily used in a business setting. With Capital budgeting funds are allocated for long term investments, like new equipment, larger facilities or by acquiring more assets for the business. With Capital budgeting it is detrimental to evaluate potential risks and the expected returns while making these investments.
Performance budgeting
Similar to capital based budgeting, performance budgeting is used to focus on allocating funds on expected outcomes or performance targets. With performance budgeting it is important to set clear goals when allocating funds to achieve the desired financial performance goals.
Zero Based
Although previously mentioned we may note that Zero based budgeting may also fall under a more advanced form of budgeting as it requires superior planning and acknowledgement of any and all funds to end reach the end goal of absolute zero.
Which budget is right for you?
Not all shoes are going to fit the same for everyone and the same is with budgeting. The right budget is simply the budget that works for you, your lifestyle, and your own financial goals. Perhaps you may want to prioritize saving and that may mean, paying yourself first budgeting is your go to system.
However you may also prioritize saving and enjoy setting a higher savings value with value based budgeting. There is no right answer here, however there is a right type of budgeting for you, you may just have to try out a few budgeting methods until you find one you are content with.
Working with a finance tutor near you
If you're failing to understand a specific subject or concept, it may be helpful to consider hiring a finance teacher. Fortunately, Superprof makes finding the right finance tutor for you easy and affordable, no matter your budget.
Superprof finance tutors are highly experienced in their fields and are enthusiastic about helping you succeed in your learning journey. With millions of tutors available on Superprof, we are confident that you'll find the ideal match for your needs.
To get started, simply search for tutors in your local area or even globally. Review their credentials and choose a tutor based on your specific criteria. Then, message with them to schedule sessions that work for both of you.
Tutors offer great flexibility, accommodating everyone's changing schedules. Having a private tutor ensures personalized attention tailored to your unique requirements and interests.
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Conclusion
Different types of budgeting include traditional, zero-based, envelope, 50/30/20, pay yourself first, rolling, and value-based budgeting. Advanced budgeting methods may include both performance and capital budgets.
At the end of the day each method offers a unique approach to managing finances, and what works for one person may not work for another. It's important to experiment with different budgeting strategies to find what suits your needs, preferences, and financial goals.
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