The 6 Most Popular and Effective Budgeting Strategies

Experts have long been emphasizing the importance of keeping a budget. After all, if one doesn’t know where their money is going each month, they cannot possibly save enough for both short- and long-term financial goals. And that’s where the top six most popular budgeting strategies come in — but are they truly worth all the trouble?

Most people believe that just practicing self-control every day could save them enough money to buy everything their heart desires. But it’s the little costs that pile up rather quickly, to the point that the whole income disappears in a puff of smoke.

To prevent binge-spending or just throwing money at things one doesn’t genuinely need, some of these budgeting strategies should become a staple in every U.S. household. However, to decide which one would be the right fit, it’s necessary to assess what kind of people should use them and what their main pros and cons are. 

Here’s a breakdown of the top six budgeting strategies most experts recommend. Hopefully, by the end, everyone will know which route to financial independence they ought to take.

1. 50/30/20 Budgeting

Let’s first talk about one of the most often used budgeting strategies, the 50/30/20. 

The gist of the strategy is pretty simple, and it helps if one imagines it as a sort of a “financial” pyramid. The bulk of the income (after taxes) has to go on needs, and it accounts for 50%. That amount of money should be used to pay the bills, rent, mortgage, minimum payments on the credit cards, and any other things that are a real necessity, such as a new pair of winter boots because the old ones are all worn out.

The remainder of the income forms the two remaining categories: discretionary expenses (30%) and savings or debt payoff (20%). 

The former serves to satisfy any wants a person can have, such as dining out, a gym membership, a new dress or two each month, etc. 

The latter is self-explanatory — it ought to prevent any debt from sneaking up and surprising people after a few months. However, if there is no debt to pay off, they can simply use it to save up on some long-term (or even short-term) financial goals, such as an expensive vacation. Even better, it’s wise to keep that 20% as an emergency fund for “God forbid” situations that may pop up any day.

Who Is It For?

Since the 50/30/20 budgeting strategy is more of a structure and thus requires knowing how much money one has each month to create it, it’s an excellent choice for anyone with a steady income. If one is a freelancer who doesn’t know how much they’ll get each month — could be more, could be less — it will be tough to keep up with it. Even if they have fixed expenses, their paycheck isn’t steady, so there’s a good chance they’d have to dip into the 50% part at some point.

Many people are raving about this strategy, as it is rather easy to implement overall. There are only three percentages one has to keep in mind, and they don’t necessarily have to track their expenses at the same time. 

Nevertheless, it does mean they have to make a few sacrifices here and there, especially if their income is low overall. If the paycheck is meager, there might not be enough funds for all three parts, which is why most people give up as soon as they see they cannot put enough into savings or use leisurely. 


  • Clear structure
  • Only three “buckets of money”
  • Can be automated (by setting up an automatic 20% transfer into savings)


  • Best for those with a fixed income
  • Might be challenging to implement in one-person households

2. Priority-Based Budgeting

A fan-favorite of many, priority-based (or values-based) budgeting is an excellent way to practice self-control but still get most of the things one wants.

Before starting to budget this way, it would be a good idea to calculate where all the money is going for a month. Tracking their expenses would give the person an insight into which parts are essential and which were just impulsive and should be taken care of with the newly set budget.

Once that’s done, it’s time to scrutinize each category. No matter how many people there are in the household, they have to settle on what to prioritize. 

For most people, the top priority (or goal) would be to pay their bills and rent or mortgage each month. Once they subtract that amount of money from their income, they can go through other things they want – or rather, value – and set aside enough money for each.

The longer the list of priorities is (they ought to go from the most to the least important ones), the more money they obviously need. Because of that, it’s crucial to examine all those expenses first and see what truly matters. Then, all it takes is to stretch the income enough to cover all the categories.

Who Is It For?

Having a fixed income and expenses would go well with this strategy, but even if someone doesn’t, it could work for them. 

In essence, values-based budgeting shifts the focus away from the numbers and connects them to emotions, as well as short- and long-term goals someone might have. 

Consequently, it’s a good option for anyone having trouble sticking to other budgeting strategies; it’s not super-limiting since whoever is making it is tailoring it according to their priorities — not what they ought to save for just in case. To that end, some may prioritize creating an emergency fund and then fixed expenses if their income allows for it.

In general, this strategy could help some people save enough for their financial goals without even trying too hard. However, to ensure its success, automatic transfers are a given. When emotions are at play, it’s quite easy to fall into the trap of “treat yourself” and make any sort of impulsive shopping spree a priority.

Once the priorities have been established, it’s best to set up an automatic transfer for at least two or three biggest ones. Then, the rest of the money can be stretched throughout the other categories. And of course, if it’s impossible to cover all the priorities or values, those who are struggling should re-prioritize. Alternatively, they can try to reduce expenses in some other areas.


  • Easy to follow with automatic transfers
  • Prioritizes actual values and financial goals
  • Introduces emotions, making budgeting less exhausting and depressing


  • Might give too much leeway to those who don’t have set priorities or change them often
  • Some may let their emotions take over, causing them to overspend on non-priorities

3. Zero-Based Budgeting

Making each dollar work seems like a given, right? Well, then how come sometimes people cannot remember where those extra $50 vanished the previous month? It’s because most of them actually think that all the leftover money is free to spend on whatever.

That’s where zero-based budgeting comes in. The strategy is pretty simple, and it’s all in the name: every single dollar has to be accounted for.

To create it, one first has to start with their income. That includes everything and anything that brings them money each month, including child support, side hustles, etc. 

The next step is to calculate the expenses. The obvious parts — the big four — are shelter, food, utilities, and transportation. Once those are covered, the remainder goes into a few different categories: miscellaneous, seasonal, irregular, and savings.

Anyone using this strategy has to make a new budget each month, as their needs might change in the meantime. One month, there might be five birthdays they have to cover, so they will need more money. The next one, they might not even have to touch one of the categories. 

Seasonal expenses are there so that no one gets surprised once Christmas, New Year’s, and any other holiday rolls in. To save up for them, one has to calculate the total costs and then divide by 12 (for twelve months). The number they get should be saved each month, forming the seasonal expenses category.

Irregular expenses are those that pop up unexpectedly, such as having to fix a car. It’s best to leave some money for those specific costs aside. In most cases, people automatically dip into the miscellaneous category to cover for these, and then into savings to cover that one. By making more categories, they may be able to prevent those irregularities.

Once the budget is all set, it’s time to subtract all those expenses, including savings, from the income. If the total amount is zero, the plan is done and ready for use. But if there is some money missing or there’s more of it, one must reduce their expenses to cover it all or use it up somehow.

Zero-based budgeting doesn’t entail having zero dollars in the bank at the end of each month. On the contrary, those savings will ensure there’s quite a bit there. However, to make it work, each dollar has to have a purpose. 

So if there’s some leftover, it’s not “free” money to use on buying new shoes, throw pillows, etc. It ought to go toward some financial goals, such as getting rid of debt, a more significant expense, like a huge surprise birthday party, or investment.

Otherwise, those few extra dollars are bound to disappear into thin air. Just leaving them without a purpose is a surefire way of spending them on something unnecessary.

Who Is It For?

Anyone who wants to control their excessive shopping habits and ensure their financial goals are fulfilled each year can safely use this strategy. It’s rather versatile, as it covers even those things that one doesn’t consider immediately, such as seasonal or irregular expenses. Better yet, it should prevent people from dipping into different buckets of money they have set up as everything is accounted for.

However, it should be noted that expense tracking is somewhat necessary here, unlike with some other budgeting strategies. Otherwise, there’s no way to tell how much money each of the categories required. Besides, it would allow for some fast emergency changes, such as a car repair costing more than one had expected.


  • A detailed financial plan for each month
  • Covers both planned and unplanned expenses
  • A hands-on approach for those who aren’t afraid of numbers
  • Works with any income or lifestyle


  • Might overwhelm some people, as there’s a lot of data to keep track of

4. Envelope Budgeting

Impulse (online) shopping is a real problem for many people, and it mostly comes down to having money available on the credit card to go through with it. That’s what makes envelope budgeting one of the most effective budgeting strategies, actually. By increasing the amount of cash one can use but lowering the amount they have on the credit card, they just might free themselves of vicious binge-spending.

Now, some may think that envelope budgeting is a bit too old-school for them. After all, technology is improving with each passing day, and it would be a shame not to use it. Thus, most people use this strategy in combination with some automatic deductions. Once the paycheck comes, they can pay online for necessities, such as rent and bills, as well as transfer a specific amount to savings.

Then the real fun begins. The remainder of the money will go on food, entertainment, etc., and even those miscellaneous expenses many have each month. However, to prevent them from overspending or, worse, charging it all on a credit card, they will have to use cash only.

The remaining amount of money should be kept somewhere in envelopes. Each envelope/category will contain a dollar sum, which serves as the limit. Once the money is gone, that’s it — they cannot spend more on that type of expense. And if there’s something left at the end of each month, it can go into a savings account or roll over into the next month.

Who Is It For?

All the other budgeting strategies on this list can be used in a cashless society. Despite the obvious predicament (using cash only), this option is a great one as well, although it works better if one is single; it’s easier to determine the right amount for each envelope when there’s just one person involved.

Additionally, it’s one of the best budgeting strategies for shopaholics who have plenty of debt to pay off but cannot seem to stop buying unnecessary stuff. By limiting themselves to cash, they’ll be able to visualize all their expenses and stop seeing credit cards as free money.

Overall, envelope budgeting can work quite well for most people, provided they don’t have to utilize online banking systems a lot or have a tendency to shop for groceries online. But even then, there must be a way for them to switch to cash only. 


  • Makes people take a good, hard look at their financial situation
  • Perfect for shopaholics who need to curb their spending habits
  • Makes one feel each expense, as they have to carry cash around


  • Hard to implement if debit or credit cards are a daily staple
  • Some payments (such as rent) might be tricky to pay in cash

5. “Pay Yourself First” Budgeting

Tired of all the percentages and carefully organized categories? The “Pay Yourself First” budgeting strategy is one that takes the least amount of planning because it has only one clear goal: save first.

The whole point is to pay oneself first by setting up an automatic transfer into a savings account each month. Once that’s done, the rest of the money can be allocated any way one pleases.

Of course, it’s necessary to track expenses or at least know how to allocate the remainder so as not to come out short each month. But overall, that’s not too much of a hassle with this strategy, as savings are already covered.

Who Is It For?

For someone with short- or long-term goals, this strategy might be perfect. They will stay on top of their savings each month, as it’s all automatically transferred once the paycheck arrives. 

However, freely spending the remainder may call for many unnecessary sacrifices. It’s evident that fixed expenses will require the most money. Thus, there might not be enough of it for everything else if someone’s income is low. After all, staying on track with rent and debt payoff has to matter more than savings, right?

Overall, this budgeting strategy is one of the best ones for people who don’t have to worry about money. For those who are already living from paycheck to paycheck, it won’t be organized enough to curb their spending habits or even provide them with a solid structure for their living expenses.


  • Simple and automated
  • Incredible for fulfilling financial goals


  • Not for those who’re struggling to pay rent or bills on time
  • No categories and, therefore, no way of knowing what someone has spent their money on

6. Tracking the Expenses

Although, at first glance, tracking one’s expenses seems like the best way of ensuring each dollar is spent well, the truth is a bit different.

There are some definite advantages here in comparison to some other budgeting strategies, such as the envelope one. If someone is super organized and analytical, they’ll enjoy creating a spreadsheet and using it on a daily basis. Additionally, it does let people stay on track budget-wise, as they’ll have a clear overview of where each cent went.

However, it is simply too tedious for most people. They’d have to update their spreadsheets frequently, so there would be a lot of room for error. On top of that, it doesn’t take savings into account, an emergency fund, or any financial goals. To cover those as well, one would need to use it in combination with another strategy.

Who Is It For?

For someone with an A-type personality, this budgeting strategy might be right up their alley. If they tend to hold onto receipts and have no problem typing each expense into their phone to add to the spreadsheet later, they may even find it entertaining.

It’s not for anyone without a steady income or suffering from shopping addiction. It doesn’t limit enough, so it’s easy to forget that the point is to save money, or at least have enough to pay for all expenses.


  • Offers great insight into where all the money is going each month
  • Plenty of apps available to make it all easier


  • An overwhelming amount of data
  • Won’t do anything for disorganized people
  • No clear structure or categories

Finding the Best Budgeting Method for You

All of these budgeting strategies have been tried and tested, and to some extent, they all work quite well. However, as is evident from all the pros and cons, particular personalities may respond better to expense tracking. In contrast, those with extensive financial goals might prefer paying themselves first.

Overall, it’s possible to mix and match budgeting strategies to fit a certain lifestyle. It’s impossible for everyone to use them all successfully, especially when their incomes may vary each month.

Bottom line? It’s all trial and error. The best way to choose would be to try each one for a month or so. At the very least, it would then be possible to compare which one saves the most money!

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