5 Simple Budgeting Methods

1. Zero-Based Budgeting (ZBB)
Overview:
Zero Budget is the process wherein each single dollar of revenue is justified on the basis of its need, beginning from $0. This is a variable system that offers no initial basic amounts for procedure kinds but validates every amount for each budgeting period.

Best For:

Those individuals who consider careful tracking of expenses and complete exclusion of any extra pennies from consideration.
People who experience fluctuations in their earnings or people who would want to reduce their expenditure.
Managers acted in an attempt to match expense to need and cut cost which are not necessary in the current business environment.
Pros:

Promotes more discipline in cases to do with finance.
Gives absolute control over financial matters.
It aids in avoiding the wastage of scarce resources.
Cons:

Time-consuming to implement.
Is most often requiring homework and frequent monitoring and tuning.
2. 50/30/20 Rule
Overview:
This simple budgeting rule divides your income into three categories: Need expenses take 50% of the income, while discretionary expenses take 30% of the income and should save or pay 20% of their income towards savings or paying a loan.

Best For:

People who prefer using a clear and straightforward approach towards implementing a budget.
People who want an intermediate system of budgeting as they have just started saving.
Pros:

Easy to follow and maintain.
Pays a fair share to meet needs, acquire wants, and acquire savings.
It still adapts to the fact while at the same time taking its focus on saving.
Cons:

May not be suited for users who currently have high debts or those who have a particular monetary target.
Lacks extensive identification of expenditures of each account.
3. Envelope System
Overview:
This involves putting cash into actual envelopes based on categories of expenditures such as food, recreation, and bills among others. Thus, once the money in the envelope is depleted, you cannot make any more spending within that category until the next budgeting cycle.

Best For:

Money owners who desire a tangible way of handling money.
Self-destructive spenders who require rigid limits placed on spending in order to avoid overindulging.
People who get advantage of involving cash instead of credit cards or debit cards.
Pros:

Offer approximately and gives the basic control over spending throughout a certain period.
It sets limitations to the extent of spending on particular classes.
Perfect for those who have a very limited budget to work with.
Cons:

Irrelevant in a world which has gone cashless or is going digital.
Not suitable for subscription-based digital transactions or for occasional large-ticket transactions.
4. Pay-Yourself-First Budget
Overview:
In this method, your primary goal of saving is achieved by deducting a certain amount for savings or investment first. The remaining money is spent on expenditures. This strategy makes it possible to meet the financial needs of the money saved before expending it on other less important things.

Best For:

Individuals were more concerned with accumulation of cash or earning for future needs through investment.
People who can only put small amounts into the savings account or those who are willing to dedicate time and energy to increase their financial worth.
Savers who may experience low income fluctuations and would like to make saving a priority before they spend.
Pros:

It assists people to be able to make constant savings towards their savings targets.
Promotes the implementation of long-term saving strategies.
Helps avoid procrastination of saving.
Cons:

May not allow a lot of flexibility for daily expenses.
Needs strong discipline to control the rest of the money after the savings.
5. Line-Item Budgeting (Traditional Budgeting):
Overview:
In this case, it is a process of outlining all revenues and costs in certain areas or departments. Each category is fixed depending on the past spending habits or best estimate for that particular period. To ensure that you are not spending more than your planned budget, you follow expenses closely.

Best For:

People with lots of transactions they need to track and a very tight budget.
Those who wish to track the spending progress overtime as well as those who have various categories to track.
People with secured income and their known expenditures.
Pros:

Very flexible and detailed.
Provides the ability to have a lot of control over a specific spending category.
Gives direction on the spending habits and the changes that are arising frequently.
Cons:

High time input needed to keep it going.
Can be quite frustrating for those who like to go about their business in less complicated ways.
Conclusion: Which is Best for You?
Thus, the best budgeting technique depends on financial status, financial objectives and the amount of time that one is willing to spend on managing his/her finance. Here's a quick guide to help you decide:

If you want total control and detailed tracking: One of the key budgeting strategies is known as the Zero-Based Budgeting or Line-Item Budgeting.
If you prefer a simple, balanced approach: 50/30/20 Rule.
If you struggle with overspending: Envelope System.
If savings is your main priority: Pay-Yourself-First Budget.
Switching to one approach after the other allows you to identify the one that aligns with your daily routine and budget.